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Rational expectations is an economic theory that seeks to infer the macroeconomic consequences of individuals' decisions based on all available knowledge. It assumes ...
The policy-ineffectiveness proposition (PIP) is a new classical theory proposed in 1975 by Thomas J. Sargent and Neil Wallace based upon the theory of rational expectations, which posits that monetary policy cannot systematically manage the levels of output and employment in the economy.
Two main assumptions define the New Keynesian approach to macroeconomics. Like the New Classical approach, New Keynesian macroeconomic analysis usually assumes that households and firms have rational expectations. However, the two schools differ in that New Keynesian analysis usually assumes a variety of market failures.
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2 rational expectations is a hypothesis or modeling technique, not a theory 2 comments 3 'Equilibrium' can mean steady state, or can mean mutual consistency of decisions
[73] Former Federal Reserve chairman Paul Volcker said "It should be clear that among the causes of the recent financial crisis was an unjustified faith in rational expectations, market efficiencies, and the techniques of modern finance."
The rational expectations theory said that expectations of inflation were equal to what actually happened, with some minor and temporary errors. This, in turn, suggested that the short-run period was so short that it was non-existent: any effort to reduce unemployment below the NAIRU, for example, would immediately cause inflationary ...
This could mean seniors need to structure their withdrawals from their investment accounts so they have more money later in life when Social Security can't meet as many of their needs, or it might ...