Which of the following theories of expectations holds that individuals form expectations by looking only to past values of the variable to be forecast?

A) Rational expectations theory
B) Certainty equivalent theory
C) Expected value analysis
D) Adaptive expectations theory

Theories Of Expectations

Various economic theories that attempt to predict how rational individuals form their expectations about future events, affecting their economic decisions.

Adaptive Expectations Theory

An economic theory that proposes individuals adjust their expectations for the future based on recent past experiences and events.

Certainty Equivalent Theory

An economic theory that quantifies how much risk an investor is willing to take on, expressed as the minimum guaranteed amount an investor would accept rather than take a gamble.