Economists have focused more attention on the formation of expectations in recent years. This increase in interest can probably best be explained by the recognition that
A) expectations influence the behavior of participants in the economy and thus have a major impact on economic activity.
B) expectations influence only a few individuals, have little impact on the overall economy, but can have important effects on a few markets.
C) expectations influence many individuals, have little impact on the overall economy, but can have distributional effects.
D) models that ignore expectations have little predictive power, even in the short run.
A
You might also like to view...
To encourage invention and innovation, the government provides
A) patents. B) public franchises. C) government licenses. D) natural monopolies. E) easily obtained ownership barriers to entry.
In the long run, the nominal exchange rate
A) is a monetary phenomenon, determined by the quantities of money in two countries. B) is not related to the real exchange rate, since the real exchange rate is the true value of currencies. C) will not change if prices in one country change, since prices are nominal variables. D) is fixed by world central banks, as indicated by the fixed exchange rate system.
Which of the following areas of study is included in the field of macroeconomics?
a. electricians’ wage rates b. monopolistic pricing c. price of automobiles d. general price level
The price level in the economy between 2014 and 2015 rose from 100 to 105. Between 2015 and 2016, the price level rose from 105 to 110.25. How does the short-run Phillips curve predict the unemployment rate will change as a result?
A) The unemployment rate will decrease since inflation decreased. B) The unemployment rate would not change since there is no change in the rate of inflation. C) The unemployment rate will increase since inflation increased. D) The unemployment rate will decrease since inflation increased.