The rational expectations theory suggests that to be a consistently correct interest-rate forecaster you must know what market participants expect to happen and:
A) Which way interest rates have gone in the recent past
B) A Masters degree in finance
C) How much value the marketplace currently places on new information
D) What reasonably could happen to market interest rates given their performance to date
E) None of the above are correct

Question

Quizplus · Accepted Answer

The rational expectations theory posits that individuals form their expectations about the future based on all available information, including how current and future policy actions will affect them. It does not specifically require knowledge of past interest rate movements, a Masters degree in finance, or an assessment of how much value the marketplace places on new information in the way these options suggest. It's more about the efficient incorporation of all relevant information into expectations.

The Rational Expectations Theory Suggests That to Be a Consistently