According to the rational expectation hypothesis, disequilibrium may exist in the labor market because
A) of unpredictable shocks.
B) firms don't know the "true model."
C) workers don't know the "true model."
D) of predictable shocks.

Question

Quizplus · Accepted Answer

The rational expectation hypothesis assumes that individuals in the economy have access to all relevant information and use it to form expectations about future economic conditions. However, unexpected shocks can still occur, leading to a temporary disequilibrium in the labor market.

According to the Rational Expectation Hypothesis, Disequilibrium May Exist in the Labor