Rational Expectations is an economic theory suggesting that individuals make decisions based on all available information and their understanding of the economy. This means that people form expectations about future events, such as inflation or interest rates, using past experiences and current data. As a result, their predictions are often accurate, leading to efficient markets. The theory implies that government policies, like fiscal or monetary measures, may have limited effects because people adjust their behavior in anticipation of these changes. This concept is closely associated with economists like Robert Lucas, who emphasized its importance in macroeconomic modeling.