English Wikipedia - The Free Encycl...
Download this dictionary
Rational expectations
In economics, "rational expectations" are model-consistent expectations, in that agents inside the model on average assume the model's predictions are valid. Rational expectations ensure internal consistency in aggregate stochastic models. To obtain consistency within a model, the predictions of the future value of economically relevant variables are optimal given the decision-makers' information set and model structure. The rational expectations assumption is used especially in many contemporary macroeconomic models. Rational expectations does not imply individual rationality and should not be confused with rational choice theory, which is used extensively in, among others, game theory.

See more at Wikipedia.org...


© This article uses material from Wikipedia® and is licensed under the GNU Free Documentation License and under the Creative Commons Attribution-ShareAlike License