Anytime it is snowing when Joe Commuter gets up in the morning, he misjudges how long it will take him to drive to work. When it is not snowing, his expectations of the driving time are perfectly accurate. Considering that it snows only once every ten years where Joe lives, Joe's expectations are almost always perfectly accurate." Are Joe's expectations rational? Why or why not?

No, Joe's expectations are not rational.

Explanation:

It has been provided that whenever it snows, commuter Joe misjudges the time he will take to drive to work.

This phenomena occurs every time when it snows.

However, when it is not snowing, Joe judges the time he will take to drive to work in perfectly accurate manner.

So, it has been stated that Joe's expectations are almost always perfectly accurate.

Rational expectation theory states that person form expectation based on all the available information, his past experiences. Expectations formed in this manner are referred to as optimal expectations.

Since, past experiences shows that Joe is not able to judge correctly the time to drive to work when it snows.

So, in future, when he forms expectations with respect to time he will take to drive to work when it snows, he must take into account his past mis judgments as well as forecast with respect to snowfall.

This will help him in improving his expectations and can achieve optimal expectations.

As he is not taking into account past experiences in correct manner and there is chance to improve expectations, the Joe's expectations are not rational.

answer; normative economics;