Rational Expectations Implies

Multiple Choice

Rational expectations implies

A) that consumers can be systematically fooled.
B) that in models with aggregate shocks, consumers and firms always correctly forecast inflation.
C) that the central bank always foresees what the fiscal authority will do.
D) that the consumers and firms in models do the best they can in forecasting future economic variables.
E) that models in which we make this assumption are always right.