5) Rational expectations A) are forward looking. B) rely on people understanding

Question

5) Rational expectations

A) are forward looking.

B) rely on people understanding economics and finance and being able to perfectly predict the future.

C) assume that rational economic actors base their decisions on inside information.

D) require rational people to adopt the Keynesian macroeconomic model when making a decision affecting the economy.

A) are forward looking.

B) rely on people understanding economics and finance and being able to perfectly predict the future.

C) assume that rational economic actors base their decisions on inside information.

D) require rational people to adopt the Keynesian macroeconomic model when making a decision affecting the economy.

Explanation / Answer

Rational expectations theory is an econonomic outlook which says that rational people make their decisions relying upon the available informations, previous experiences and rational thinking.

Rational expectations

Here the rational economic actors refers to the the rational people of the economy, and inside informations means their rational thinking, available informations and previous experiences.

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