*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
Get the rational expectations hypothesis mug.The Milgram experiment was a series of seminal social psychology experiments conducted by Yale University psychologist Stanley Milgram, which measured the willingness of study participants to obey an authority figure who instructed them to perform acts that conflicted with their personal conscience.
In Milgram's first set of experiments, 65 percent of experiment participants administered the experiment's final 450-volt shock, though many were very uncomfortable doing so; at some point, every participant paused and questioned the experiment, some said they would refund the money they were paid for participating in the experiment.
NO PARTICIPANT STEADFASTLY REFUSED TO ADMINISTER SHOCKS BEFORE THE 300-VOLT LEVEL.
In Milgram's first set of experiments, 65 percent of experiment participants administered the experiment's final 450-volt shock, though many were very uncomfortable doing so; at some point, every participant paused and questioned the experiment, some said they would refund the money they were paid for participating in the experiment.
NO PARTICIPANT STEADFASTLY REFUSED TO ADMINISTER SHOCKS BEFORE THE 300-VOLT LEVEL.
Student 1 : Wow that took some guts! Carla sure knows how to stand up to the 'ol prof
Student 2 : yeah, a real Milgram's exception if I ever saw one...
Student 2 : yeah, a real Milgram's exception if I ever saw one...
by Gautam Sishta March 14, 2008
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A person who no matter the situation or risk will beat the odds. A person that always proves you wrong, weather its a dangerous person holding a gun to his face and (while laughing) unarms the person, An Exception to the Rule falls off a derrick and breaks his back and still gets back up and walks, works, and party's harder than any other motherfucker in the world. The Exception to the Rule will drink you under the table and not have a hangover. The Exception to the Rule will have a stroke and not go to the hospital but still be able to get up in the morning to take his son to school displaying no effects from the otherwise debilitating physical event. The Exception to the Rule will be the person to explain freedom from tyranny after suffering more than most in the world could ever understand, and then give you a true and honest solution to the problem and create a world wear all people are truly free and safe. The Exception to the Rule will always keep his word, will always prove you wrong. The Exception to the Rule is the type of person who should be the President of the United States of America, The Exception to the Rule is the type of person you will remember and tell stories of to your children and your children's children will tell stories of. The Exception to the Rule is your true best friend, the ultimate lover, an amazing father and son, he is the light in darkness and mind of an artist and warrior all at the same time never relenting and always sharp as a tack.
by Mike Ryan's Exception February 14, 2017
Get the exception to the rule mug.When a white female doesn't date a guy(mainly black) of another race, unless he is famous/a celebrity.
LL Cool J is USUALLY the standard set for black males.
LL Cool J is USUALLY the standard set for black males.
Girl: I don't date black guys. But I'd SO date LL Cool J!
Black guy: I see you're using the White Girl Celebrity Exception as an excuse/copout.
Black guy: I see you're using the White Girl Celebrity Exception as an excuse/copout.
by Kaiser1one February 23, 2011
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Get the null pointer exception mug.They george bushed our expectations with Sara Palin's debate.
or
They set George Bush expectations for Sara Palin before the debate.
or
They set George Bush expectations for Sara Palin before the debate.
by jjthekid January 8, 2010
Get the George Bush expectations mug.Rule 34A states that it is impossible to invoke Rule 34 on itself; however, as mentioned as a clause for some definitions of Rule 34, abstract concepts cannot have rule 34 invoked upon them. This makes Rule 34A entirely unnecessary as Rule 34 is an abstract concept itself and thus cannot be invoked upon itself, making Rule 34A unnecessary. However, Rule 34A could become the "No Abstract Concepts" Clause.
Guy 1: Rule 34 on Rule 34!
Guy 2: Denied, Rule 34 Exception. Rule 34 is an abstract concept and can't be Rule 34'd.
Guy 2: Denied, Rule 34 Exception. Rule 34 is an abstract concept and can't be Rule 34'd.
by VERTIGO7 August 14, 2011
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