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1. Discuss the rational expectations hypothesis (REH). How does the REH differ from adaptive expectations? Explain the implications of REH for the effectiveness of macroeconomic stabilization policy.

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The rational expectations hypothesis (REH) is applied.

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1. Discuss the rational expectations hypothesis (REH). How does the REH differ from adaptive expectations? Explain the implications of REH for the effectiveness of macroeconomic stabilization policy.

Answer:

According to the rational expectation hypothesis, people form there expectation sensibly based on the information they have or the information they are willing to acquire. There are two versions of rational ...

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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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