Suppose that the nation of rationalia experiences the inflation rates shown from 2013 through 2015. if the rationalian citizenry behaves according to the rational expectations theory, what will they expect the inflation rate to be in 2016

Question

Business

Nathaniel Mccullough

28 January, 10:37

Suppose that the nation of rationalia experiences the inflation rates shown from 2013 through 2015. if the rationalian citizenry behaves according to the rational expectations theory, what will they expect the inflation rate to be in 2016

+2

Answers (1)

Know the Answer?

Estrella · Answer 1

The rational expectation theory refers to a concept in economics which describes the manner in which people make their choice based on rational outlook, information that is available and their experience in the past. The theory states that the present situation in an economy is equivalent to what people think will happen in the economy in the future. Thus, for the question given above, if the citizens of Rationalia are thinking rationally, they will expect the inflation rate to be the same as before in 2016.