Under rational expectations, people use:
A) all the information at their disposal to make their best forecasts of the coming rate of inflation
B) all past rates of inflation to make their best forecasts of the coming rate of inflation
C) announcements by the Fed to make their best forecasts of the coming rate of inflation
D) only the Fed's inflation target to make their best forecasts of the coming rate of inflation
E) the unemployment rate to make their best forecasts of the coming rate of inflation

Question

Quizplus · Accepted Answer

Rational expectations theory assumes that people make rational decisions based on all available information, including past trends, current data, and future expectations. Therefore, under rational expectations, people use all the information at their disposal to make their best forecasts of the coming rate of inflation.

Under Rational Expectations, People Use