Rational

expectations theory developed at a tune when the United States was grappling with high inflation.

The rational expectations critique against Austrian business cycle theory only really works if all--or at least an overwhelming majority of--entrepreneurs are "rational" in the very strict sense implied by rational

expectations theory.

This principle extends even to the sphere of macroeconomics regarding topics such as the efficient market hypothesis and rational

expectations theory.

The rational

expectations theory requires ordinary people to know about, understand, and care about Bank of Japan policy.

The assertion seemed at odds with everything Bill taught us in graduate school at Brown--that, according to rational

expectations theory, more information should be better than less.

Thus, Cardinal Cajetan, a sixteenth-century prince of the Church, can be considered the founder of

expectations theory in economics.

These complementary decompositions relate real or nominal long-term interest rates to expected future short-term interest rates (the

expectations theory of the term structure), and relate short- or long-term nominal interest rates to the ex ante real interest rate and the expected inflation rate (the Fisher equation).

Credit was available for all sensible approaches, although the highest marks would have been awarded to candidates who showed an understanding of

expectations theory as it applies to options.

The

expectations theory is probably the explanation most widely held.

Each relaxes the traditional rational

expectations theory in a certain way.

The rational

expectations theory of the term structure asserts that the return on an n-period bond should equal the average of the expected returns on m-period bonds over the life of the n-period bond (where n=km), plus a term premium.

According to the

expectations theory of the term structure, the current yield on ten-year Treasury bonds equals a weighted average of the values of the federal funds rate expected over the forty-quarter term of the bond, plus a term premium,