One major assumption of the theory of rational expectations is that

A) all firms use rational expectations.
B) the economy does not have a self-correction mechanism.
C) the economy has a very effective self-correction mechanism.
D) all consumers use rational expectations.

The theory of rational expectations assumes that the economy has a highly effective self-correction mechanism, meaning that market participants are able to adjust their expectations based on new information and market forces so that the economy tends towards equilibrium. This assumption is central to macroeconomic models that are built on the theory of rational expectations.