Which of the following is a characteristic of the 'Rational Expectations' hypothesis?
A. Expectations are always adaptive
B. Agents use only past information and make systematic errors
C. Agents form expectations using all available information and do not make systematic errors
D. Agents ignore all available information
Answer: Option C
Solution (By JKSSB Mock Tests)
Rational expectations imply that agents optimally use all available information, so that forecast errors are uncorrelated with information known at the time the expectation is formed.
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