The rational expectations view suggests that new information made available to market investors will tend to cause interest rates to fall temporarily below their equilibrium values, but rates will rapidly move back toward equilibrium.

Question

Quizplus · Accepted Answer

The rational expectations view suggests that when new information is made available, market investors will quickly incorporate this information into asset prices, causing interest rates to adjust toward their new equilibrium values, rather than falling below their equilibrium values temporarily.

The Rational Expectations View Suggests That New Information Made Available