  The nonuniqueness of rational expectations is explained: in the stochastic,
discrete-time, linear, constant-coefficients case, the associated free
parameters are coefficients that determine the public's most immediate
reactions to shocks. The requirement of model-consistency may leave these
parameters completely free, yet when their values are appropriately specified,
a unique solution is determined. In a broad class of models, the requirement of
least-square forecast errors determines the parameter values, and therefore
defines a unique solution. This approach is independent of dynamical stability,
and generally does not suppress model dynamics.
  Application to a standard New Keynesian example shows that the traditional
solution suppresses precisely those dynamics that arise from rational
expectations. The uncovering of those dynamics reveals their incompatibility
with the new I-S equation and the expectational Phillips curve.
