Which of the following is an example of adaptive expectations?
a. James hears that many companies are laying off people and decides not to change his job at this time
b. Kirsten reads about the continuous rise in the prices of necessary goods and the simultaneous rise in the level of unemployment and knows that the country is heading for stagflation.
c. Kate knows that inflation is on the rise and that the best strategy for her firm would be to lower the price of its product.
d. Peter knows that the Federal Reserve is planning to lower interest rates next month and decides to apply for a loan.
a
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If purchasing power parity holds, the exchange rate (e) can be expressed as a function of the domestic price (P) and the foreign price (P*) as
A) e = P - P*. B) e = P* - P. C) e = P* + P. D) e = P/P*.
Tariffs provide domestic producers with incentives to be inefficient and operate on the basis of comparative disadvantage
Indicate whether the statement is true or false
Caution must be exercised in using regression models for prediction when:
a. the value of the independent variable lies inside the range of observations from which the model was estimated b. the value of the independent variable lies outside the range of observations from which the model was estimated c. diminishing returns are present d. the existence of saturation levels are present e. none of the above
The notion that the value of money is determined by the overall quantity of money in existence is known as the:
A. quantity theory of money. B. money quantity theory. C. price level theory. D. level theory of prices.