Define the Theory of Rational Expectations

question 171

Essay

Define the theory of rational expectations. Explain the following statement: "An economist who believes in rational expectations argues that all markets, on average, will settle at equilibrium levels."

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Definitions:

Foot

A unit of measurement equal to 12 inches or 0.3048 meters, commonly used in the United States for length.

Axial Skeleton

The part of the skeleton that includes the bones of the head and trunk, such as the skull, spine, and rib cage.

Cranium

The part of the skull which encloses the brain, consisting of the frontal, parietal, temporal, occipital, sphenoid, and ethmoid bones.

Hyaline Cartilage

A type of tough, elastic cartilage that provides cushioning and support for body structures such as the ribs, nose, and trachea.