*noun*; a method of representing the economy as the sum of many identical individuals and firms, each represented by a system of mathematical equations. The Rational Expectations Hypothesis (REH) takes its name from the premise that economic actors, i.e., everyone, do not make consistent errors about the present or future behavior of markets.
REH was devised mainly as a rebuke to Keynesian economics, and in particular, the strategy of fiscal policy or monetary policy.
According to the REH, fiscal policy does not alter aggregate demand because the "average" person recognizes that her lifetime income is not increasing--so she needs to save rather than spend the stimulus money, in anticipation of higher taxes in the future.
At the same time, monetary policy does not work because it relies on lowering interest rates to make more money available; more money means inflation, but people have to be deceived into thinking prices for their product are going up, so they will expand production. According to REH, people or firms will figure this out, and see increased demand as mere inflation. Instead of increasing output and employment, they'll want to raise prices so they can meet their future bills.
According to REH, both monetary and fiscal policy rely on illusions to work; and since people (on average) will make rational estimates o the future, they will defeat these illusions.
REH was devised mainly as a rebuke to Keynesian economics, and in particular, the strategy of fiscal policy or monetary policy.
According to the REH, fiscal policy does not alter aggregate demand because the "average" person recognizes that her lifetime income is not increasing--so she needs to save rather than spend the stimulus money, in anticipation of higher taxes in the future.
At the same time, monetary policy does not work because it relies on lowering interest rates to make more money available; more money means inflation, but people have to be deceived into thinking prices for their product are going up, so they will expand production. According to REH, people or firms will figure this out, and see increased demand as mere inflation. Instead of increasing output and employment, they'll want to raise prices so they can meet their future bills.
According to REH, both monetary and fiscal policy rely on illusions to work; and since people (on average) will make rational estimates o the future, they will defeat these illusions.
The rational expectations hypothesis states that we can break the realization of a return into an expected return that depends on the current information set and an unexpected component that depends only on new information.
by Abu Yahya March 3, 2009
When you are stuck in traffic and really have to urinate. You are so desperate to go that you pee in whatever is in the car.
"Man, I drank so much coffee this morning that I had des-pee-ration like you wouldn't believe. I filled my empty coffee cup up twice."
by TexasTia February 13, 2010
The plaice was three inches long and had a maggot in it. Why are we reduced to these boarding school rations?
by Fearman August 6, 2007
The simplistic logic system of Bush supporters and other morons - apparently you have to trust him because he's President (even though 49% of the US population didn't vote for him), and anyone who criticises America is either jealous of their greatness, embittered French people who surrender all too easily, or a member of the global al-Qu'eda network.
by OD Smith March 23, 2005
The extreme mental and sometimes emotional frustration that comes from trying to reason with someone who is not using rationality to drive their decisions (e.g. religious fanatics, conspiracy theorists, etc.)
John: Hey have you heard about this documentary called "Plandemic" - it's about how THEY created the coronavirus in order to enslave us with a vaccine that everyone "has to take".
Peter: What the fuck are you talking about John? I watched it and it's clearly horseshit. No one in that video is credible and almost all of them have been debunked as crackpots elsewhere...why are you telling me about this shit?
John: Dude, you don't understand, THEY have a plan and we are going to lose our freedom, bro. Why can't you see? Don't be a sheep, man!
Peter: Thanks John, now you've given me rational blue balls. I need to go talk with a reasonable person and maybe I'll feel better.
Peter: What the fuck are you talking about John? I watched it and it's clearly horseshit. No one in that video is credible and almost all of them have been debunked as crackpots elsewhere...why are you telling me about this shit?
John: Dude, you don't understand, THEY have a plan and we are going to lose our freedom, bro. Why can't you see? Don't be a sheep, man!
Peter: Thanks John, now you've given me rational blue balls. I need to go talk with a reasonable person and maybe I'll feel better.
by weyus May 7, 2020
Group that is out to tell everyone what to believe and what not to believe while apparantly "liberating" everyone from the "Christian lie." basically just pisses people off by being the biggest haters i've ever heard of for little or no gain.
person from rational response squad: excuse me, what religion are you?
normal person: um, I'm a Christian. why?
rrs: well you probably want to convert into some Bible reading zombie then right?
normal person: uh, not really, i kinda just want to spread a little love.
rrs: why won't you bigots leave me alone?
normal person: wait, aren't you the one who brought this up?
rrs: oh there you go again, trying to suck me into your little argument.
normal person: dude, who's arguing, you're the one being a hater. I'm outa here.
rrs: wait, don't you want to see my movie? God's not real! God's not real!
everyone with a brain: wow, what a jerk.
normal person: um, I'm a Christian. why?
rrs: well you probably want to convert into some Bible reading zombie then right?
normal person: uh, not really, i kinda just want to spread a little love.
rrs: why won't you bigots leave me alone?
normal person: wait, aren't you the one who brought this up?
rrs: oh there you go again, trying to suck me into your little argument.
normal person: dude, who's arguing, you're the one being a hater. I'm outa here.
rrs: wait, don't you want to see my movie? God's not real! God's not real!
everyone with a brain: wow, what a jerk.
by Diggity-Dan April 25, 2007
The act of a girl grinding her pelvis into a boy's pelvis while hooking up and straddling
like dry humping, but dry grinding sex motion
very useful and hot!
like dry humping, but dry grinding sex motion
very useful and hot!
by skiibunny27 November 18, 2008