Question

When using rational expectations, forecast errors will, on average, be ________ and ________ be predicted ahead of time. A) zero; cannot B) negative; can C) positive; can D) positive; cannot

Answer 1

Answer:

A) zero; cannot

Step-by-step explanation:

In line with the principle of rational expectations, expectation errors are unpredictable. The expectations of all available information will not differ from the optimal projections.The word optimal projection is inexorably intertwined with the best guess in rational expectations theory.