Asked by Kristina Singh on May 25, 2024
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_______ theory holds that individuals use all information available in forming expectations.
Rational Expectations
An economic theory assuming individuals and firms use all available information to make forecasts and decisions, leading to outcomes that align with those expectations.
Expectations Theory
A theory in finance which suggests that the yields on long-term bonds will equal the average of short-term interest rates expected in the future, adjusted for a risk premium.
- Understand the principles of rational expectations theory and its criticisms.
Verified Answer
Learning Objectives
- Understand the principles of rational expectations theory and its criticisms.
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