*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.to make excuses by masking own flaws/insecurities by explaining one's own reasoning/actions, often used to avoid the real reason or reality when all it does it make one small, simple & scared.
Joe: Bill why did you beat that guy up?
Bill: cuz he flirted with my girlfriend dude.
Joe: Umm, he was just asking where a store is.
Bill: Well, I had to protect her honor & defend her, besides he looked shifty.
Joe: You're just doing nothing but rationalize.
Bill: cuz he flirted with my girlfriend dude.
Joe: Umm, he was just asking where a store is.
Bill: Well, I had to protect her honor & defend her, besides he looked shifty.
Joe: You're just doing nothing but rationalize.
by fballjones October 12, 2010
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Ratona • ramona • RationalWiki • raton • Ratoath • raeona • Ramona, California • Ramona Flowers • rational • Rationalussy
Scientist 1: Look! I've discovered a new type of cancer!
Scientist 2: That's just rationalwiki
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by AcidSpittingLlama January 2, 2018
Get the Rationalwiki mug.Ramonas are sensitive people who enjoy keeping secrets. They relate well on a one-to-one basis but have trouble in a larger forum. They are extremely resourceful. They value the experience of others and often owe their success to the help of a mentor.
Ramonas depend upon their friends to help them through difficult times. While they can appreciate the social value of good companions, they prefer to foster more meaningful relationships. They are loyal and have long memories. In romance, their high expectations, if not fulfilled, may lead to a broken heart.Ramona's are inconsistent in their health and fitness habits. They start a regimen with enthusiasm, only to let it slide when they lose interest. Ramona's are partner-oriented and may do best on a fitness program if they have a buddy. Ramona's have a great regard for knowledge. They are outstanding teachers who know how to draw others into their world of learning and wisdom. Although they have very good financial and business skills, they are not motivated by money. They are budget-minded but not thrifty in the traditional sense. They have a quiet determination that helps them to accomplish their aims. As adolescents, they may have trouble distinguishing goals from pipe dreams. They need to become more independent in their relationships.
Ramonas depend upon their friends to help them through difficult times. While they can appreciate the social value of good companions, they prefer to foster more meaningful relationships. They are loyal and have long memories. In romance, their high expectations, if not fulfilled, may lead to a broken heart.Ramona's are inconsistent in their health and fitness habits. They start a regimen with enthusiasm, only to let it slide when they lose interest. Ramona's are partner-oriented and may do best on a fitness program if they have a buddy. Ramona's have a great regard for knowledge. They are outstanding teachers who know how to draw others into their world of learning and wisdom. Although they have very good financial and business skills, they are not motivated by money. They are budget-minded but not thrifty in the traditional sense. They have a quiet determination that helps them to accomplish their aims. As adolescents, they may have trouble distinguishing goals from pipe dreams. They need to become more independent in their relationships.
Trustworthy is another word for Ramona.
by your-mother.ha. April 25, 2011
Get the Ramona mug.Ratanak is and amazing guy that can charm you but can hurt you too. Ratanak is hot and strong but can be cocky with his friends around. With his girlfriends he will make the relationship not a big deal but Inside he is dying to have a night with you alone. He will always want to buy you expensive things to make you happy but really he’s just trying to get your attention. No matter what he will always be by your side with any situation and will stick up for you. He’s Hot and Smart but might not always get the girls in the easier way.
Ratanak is a Hotttieeee and Richiieeeeee
by imboredatschoolrnaf November 14, 2017
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by AntBlaze July 2, 2018
Get the RationalWiki mug.An area, heading northwest from Palmetto+441, that encompasses from Logger's Run until the end of Boca Greens. Has had a very high crime rate since 2006, fueling the Palm Beach County disaster. Known for its ridiculous amounts of available Oxycontin and marijuana.
ey mayn, how many niggas been shot n killed in west boca raton fo less than 2 bills in the past 3 years?
i dont even wanna think about it brah
yo man what we doin today?
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i dont even wanna think about it brah
yo man what we doin today?
straight ridin on fuck niggas in west boca raton, then getting some jon smith's subs
by mankilla July 8, 2009
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