The only difference between adaptive and rational expectations is that adaptive expectation assumes economic agents to be irrational.

Question

Quizplus · Accepted Answer

Adaptive expectations assume that economic agents form their expectations based on past trends and experiences, while rational expectations assume that economic agents form their expectations based on all available information and make rational decisions. Neither approach assumes that economic agents are inherently irrational.

The Only Difference Between Adaptive and Rational Expectations Is That