The view that individuals weigh all available evidence when they formulate their expectations about economic events (including information concerning the probable effects of current and future economic policy) is called
A) the adaptive expectations hypothesis.
B) the permanent income hypothesis.
C) the rational expectations hypothesis.
D) the Phillips curve.

Question

Quizplus · Accepted Answer

The view that individuals weigh all available evidence when they formulate their expectations about economic events is known as the rational expectations hypothesis. It is based on the assumption that people use all available information to form their expectations and make decisions, including information about current and future economic policies. This theory suggests that people are forward-looking and make decisions based on their beliefs about future events, which can have important implications for economic outcomes.

The View That Individuals Weigh All Available Evidence When They