Principles of Macroeconomics / Unit 10 MAC 0907 short lesson, about 20 seconds
Rational and Adaptive Expectations
Captions available
The idea
Two accounts of expectations. Adaptive expectations say people learn from past experience and adjust gradually. Rational expectations say people use all available information, including announced policy, and act on it at once.
In practice
Under rational expectations, an anticipated policy is priced in before it arrives.
Where people slip
The two differ in speed, and therefore in whether policy can move real output.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
Unlocks
Something wrong in this lesson? Flag it · Sources for Principles of Macroeconomics