The Rational Expectations Approach Differs from the Perfect Foresight Approach

question 35

Multiple Choice

The rational expectations approach differs from the perfect foresight approach, since it assumes that

• A)markets do not clear rapidly
• B) people make systematic errors in their forecasts
• C)the monetary policy multiplier is always zero
• D)people may not always be right but their best guess of the forecast error is zero
• E)none of the above

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