According to the adaptive expectations hypothesis, people will
a. anticipate that what has happened in the immediate past will continue.
b. systematically overestimate inflation when inflation is increasing.
c. use all available information, including information on the expected impact of economic policy, when they formulate expectations about economic events.
d. systematically underestimate inflation when inflation is declining.
A
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Suppose that a factory is located on the outskirts of a small town. As a by-product of its production process, it produces sulfur dioxide that gets released into the air. The sulfur dioxide lowers the quality of the in the town
Suggest some possible remedies for this negative externality.
The fundamental rule of profit maximization for firms is to produce where:
a. MR = MC. b. ATC is minimized. c. quantity of output is maximized. d. price is maximized. e. total revenue is maximized.
The 2001-2007 economic expansion began when a change in Federal Reserve policy and other global conditions caused interest rates to drop and stay low
a. True b. False
A consumer should increase this/her consumption of good X relative to good Y if:
A. the marginal benefit per dollar spent on good X is greater than the marginal benefit per dollar spent on good Y. B. the marginal benefit per dollar spent on good X is smaller than the marginal benefit per dollar spent on good Y. C. the marginal benefit per dollar spent on good X is the same as the marginal benefit per dollar spent on good Y. D. None of these