A rational expectation is
A) a forecast devoid of all emotions.
B) a forecast which perfectly foretells the future.
C) the best possible forecast based upon all relevant information.
D) the forecast that automatically carries over from past forecasts.

Question

Quizplus · Accepted Answer

Rational expectations theory posits that individuals make forecasts that optimally utilize all available information. Thus, a rational expectation is not about perfect foresight or emotionless predictions, but about making the best possible forecast with the information at hand.

A Rational Expectation Is