Define the Rational-Expectations Hypothesis

question 70

Essay

Define the rational-expectations hypothesis. Explain the following statement. A rational-expectations theorist argues that all markets, on average, will settle at equilibrium levels.

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Definitions:

Month-olds

A term referring to the age of infants or young children, counted in months.

Vision

The ability to see; the faculty of sight, or a concept or mental image of what the future could or should be like.

Sound Waves

are a form of mechanical energy that travels through a medium (air, water, solids) as vibrations, producing the sensation of hearing when they reach the ear.

Sensation

The process by which our sensory receptors and nervous system receive and represent stimulus energies from our environment.