Rational expectations are:
A) forecasts that are technically correct.
B) forecasts that, while not necessarily correct, are the best that can be made given the available data.
C) forecasts that accurately predict the short-term future for wages and prices.
D) forecasts made by economists based on sophisticated econometric models.

Question

Quizplus · Accepted Answer

Rational expectations are forecasts that are made based on all available information and are the best that can be made given the available data. These forecasts are not necessarily correct, but they are the most accurate based on the information at hand. Rational expectations take into account the expectations of individuals and organizations in the economy, as well as their past experiences and behavior. They are used to predict future economic conditions, including inflation, interest rates, and economic growth.

Rational Expectations Are