This seven-page graduate paper focuses on the Rational expectation model and its connection with exchange rate and full employment. Robert Lucas, the pioneer of Rational expectation model maintains that people are able to predict their economic future with the information available and therefore the government should not intervene for the regulation of financial markets. The proponents of Rational expectation theory argue that there are some variables present within the economy that possess self-correcting powers and therefore government intervention is unnecessary. 7 pgs. Bibliography lists 7 sources.
