According to the rational expectations school, how do people form expectations?
A) On average, people who form expectations have very little idea of what to expect from government policymakers.
B) People form expectations by focusing only on the private sector.
C) People do NOT consider the likely government policies when forming expectations, thus they choose to remain rationally ignorant.
D) People form expectations, in part, by considering the probable future actions of government policymakers.

Question

According to the rational expectations school, how do people form expectations?  
A) On average, people who form expectations have very little idea of what to expect from government policymakers. 
B) People form expectations by focusing only on the private sector. 
C) People do NOT consider the likely government policies when forming expectations, thus they choose to remain rationally ignorant. 
D) People form expectations, in part, by considering the probable future actions of government policymakers.

Quizplus · Accepted Answer

According to the rational expectations school, people form expectations by considering the probable future actions of government policymakers. This means that individuals expect government policies to be based on rational decision making and use this knowledge to form their own expectations about future economic outcomes.

According to the Rational Expectations School, How Do People Form