Adaptive expectations: assumes peoples' behaviour is totally correlated to past behaviour. History is the dominant factor in choice.
Rational expectations: assumes people's behaviour is mostly correlated to acquisition and use of any information about the choice at hand. Rationality is the dominant factor in choice.
Rational expectation are expectation formed by individuals based on past experience and on their predictions about the effects of present and future policy actions. Adaptive expectations are based only on the past and expected inflation changes slowly. by marowe f.m.
The statement is wrong. Rational expectations hypotesis says people do not make errors in a systematic form. People make errors, but are able to correct them instead of repeat them.
The reduction in the money supply increases the price level, causes deflation, and may increase or decrease the GDP depending on the level of rational expectations.
According to theory, the efficiency market theory requires that the agents involved have rational expectations, and that the population is correct on average; whenever relevant, new information appears, the agents will update their information appropriately.
Non rational refers to the limitations of knowledge , information
why are adaptive expectations inefficient
Rational expectation are expectation formed by individuals based on past experience and on their predictions about the effects of present and future policy actions. Adaptive expectations are based only on the past and expected inflation changes slowly. by marowe f.m.
Laurence Broze has written: 'Reduced forms of rational expectations models' -- subject(s): Macroeconomics, Mathematical models, Rational expectations (Economic theory)
Patrick H. McAllister has written: 'Rational behavior and rational expectations'
Charles H. Whiteman has written: 'Linear rational expectations models' -- subject(s): Economics, Mathematical models, Rational expectations (Economic theory)
Enrico Minelli has written: 'Rational expectations in games' -- subject(s): Mathematical models, Equilibrium (Economics), Game theory, Rational expectations (Economic theory)
Rational numbers include integers, but they also include fractions.
Thomas Lindh has written: 'Essays on expectations in economic theory' -- subject(s): Rational expectations (Economic theory)
David K. H. Begg has written: 'The economics of floating exchange rates' 'The rational expectations revolution in macroeconomics' -- subject(s): Macroeconomics, Rational expectations (Economic theory) 'Financing government expenditure'
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Rational numbers are numbers that can be written as a fraction. Irrational numbers cannot be expressed as a fraction.