10. When faced with uncertainty about the future, economists suggest that it is sensible to assume the public will calculate what is known as ratio- nal expectations. The hypothesis of rational expectations states that the public's forecasts of various economic variables, including the price level, are based on reasoned and intelli- gent examination of available economic data. To form an intelligent expectation of economic variables, the public is assumed to take into consideration what they observe about the state of the economy, and what they have come to understand to be the nature of government eco- nomic policy.