According to the rational expectations theory, how do people's predictions about future inflation typically perform?

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They tend to systematically predict inflation rates higher than what actually occurs.They are perfectly accurate without any mistakes.They generally forecast inflation rates lower than the actual figures.On average, their predictions are accurate but include errors that are randomly spread.They are completely unreliable and bear no relation to actual inflation.

Explanation

The rational expectations hypothesis posits that individuals' forecasts of future inflation are unbiased on average, meaning they do not consistently overestimate or underestimate. However, these predictions can have random errors, reflecting unpredictable factors that cause deviations from actual inflation.