People are said to have rational expectations if they
A) use all available information in forming their expectations.
B) assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years.
C) merely guess at the inflation rate.
D) assume that this year's inflation rate will be the same as last year's inflation rate.

Question

Quizplus · Accepted Answer

Rational expectations means that people use all available information, including past trends and current economic conditions, to form their expectations about future events. This helps to create more accurate predictions and reduce errors in economic decision-making. Choices B, C, and D all involve using limited or outdated information to form expectations, which would not be considered rational.

People Are Said to Have Rational Expectations If They