According to the rational expectations school, what do people base their expectations about inflation on?
A) on the announcement of a change in inflation policy
B) on weighted averages of previous inflation rates, with the most distant getting the heaviest weight
C) on all information available to them
D) on changes in monetary and fiscal policy

Question

According to the rational expectations school, what do people base their expectations about inflation on?  
A) on the announcement of a change in inflation policy 
B) on weighted averages of previous inflation rates, with the most distant getting the heaviest weight 
C) on all information available to them 
D) on changes in monetary and fiscal policy

Quizplus · Accepted Answer

According to the rational expectations school, people base their expectations about inflation on all available information, including economic fundamentals, past trends, and policy changes. Rational expectations theory assumes that individuals are forward-looking and use all available information to form their expectations about future economic conditions. It rejects the idea that people base their expectations solely on recent past observations or changes in policy.

According to the Rational Expectations School, What Do People Base