1.   It was this criticism of the adaptive expectations hypothesis that led to the development of the rational expectations hypothesis.

2.   Later we devote a full chapter to the application of rational expectations to the theory and estimation of the aggregate consumption function.

3.   More formally, we can test the rational expectations hypothesis by testing the joint null hypothesis,.

4.   Possession of such direct observations on expectations would allow us to test the validity of the rational expectations hypothesis in two ways.

5.   Rational expectations catch up with the actual inflation rate.

6.   The aggregate supply curve slope can be explained along rational expectations lines due to misperceptions of prices.

7.   The Market efficiency hypothesis states that the Market behaves as if traders possessed rational expectations.

8.   The restrictions generated by rational expectations models are very often non-linear and are also imposed across equations rather than in a single equation.

9.   Therefore the rational expectations hypothesis suggests a valid method of incorporating additional information when estimating macroeconomic models which contain expectation terms.

10.   This aggregate supply curve is of fundamental importance to the macroeconomic policy conclusions often drawn from the rational expectations hypothesis.