If people form their expectations using all the information available to them, they are said to have
A)informed expectations.
B)rational expectations.
C)irrational forecasts.
D)an information set.

Question

Quizplus · Accepted Answer

Rational expectations theory holds that people form their expectations using all available information, including current and past economic conditions, policy changes, and market trends. This is different from uninformed or irrational expectations, which may be based on incomplete or outdated information or subjective biases. Rational expectations play an important role in macroeconomic models and policy decisions, as they can help predict how individuals and markets will respond to changes in economic conditions or government policies.

If People Form Their Expectations Using All the Information Available