The Rational Expectations Hypothesis Is a Theory That States That

question 155

Multiple Choice

The rational expectations hypothesis is a theory that states that

• A) individuals can predict the future perfectly, at least with respect to macroeconomic variables like the interest rate and inflation.
• B) people make their economic plans by using all available past and present information and their understanding about how the economy operates.
• C) people make their economic plans in an irrational, intuitive manner.
• D) people make their economic plans by relying on the policy statements made by the President and by leaders in Congress.

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