In the View of Rational Expectations Theory

Multiple Choice

In the view of rational expectations theory,

A) people make economic forecasts that are based on insider-outsider relationships and self- fulfilling prophecies.
B) people form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur.
C) people form their expectations on present realities and only gradually change their expectations as experience unfolds.
D) the economy does not respond quickly to changes in prices, which causes a misallocation of economic resources.