Final answer:
Rational expectations theory assumes individuals and firms behave rationally, using all available information to predict future economic events, leading to rapid economic adjustments. This contrasts with adaptive expectations, which rely on past experiences and result in gradual changes. Therefore the correct answer is B. behave rationally, intelligently processing information to form expectations about things that are economically important to
Step-by-step explanation:
The assumptions that form the basis for the rational expectations theory (RET) primarily revolve around the concept that individuals and firms behave rationally by intelligently processing available information to form expectations about economically important events. This differs from adaptive expectations, where past experiences guide expectations and adjustments occur gradually over time. According to the rational expectations theory, people utilize all information at their disposal to form the most accurate predictions, which implies that economic adjustments may occur rapidly, as individuals instantly update their expectations in response to new information.