Recall the Application about how to estimate the shifts in the natural rate of unemployment to answer the following question(s).
-According to the theory of rational expectations, people do not make mistakes when they form their expectations.

Question

Quizplus · Accepted Answer

According to the theory of rational expectations, people use all available information efficiently, but this does not imply they never make mistakes; rather, it suggests that on average, their predictions are accurate and systematic errors are not made. Mistakes can still occur due to unforeseeable events or changes.

Recall the Application About How to Estimate the Shifts in the Natural