The theory of rational expectations states that
a. expected inflation will be no different from actual inflation, on average.
b. expectations are based on all possible information.
c. individuals always act optimally.
d. expected inflation will be lower than actual inflation.
A
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A nation's market-risk premium rises if:
a. The volatility (e.g., standard deviation) of expected inflation rises. b. The average expected inflation rate rises. c. Security maturities lengthen. d. All of the above.
Define the following terms and explain their importance to the study of macroeconomics. a. the relationship between interest rates and velocity b. lags in stabilization policy c. rules versus discretion
What will be an ideal response?
For what kinds of goods are buyers most likely to seek additional information about quality?
What will be an ideal response?
Interest paid by households and by the government is
A. not counted in GDP because it is not assumed to flow from the production of goods and services. B. not counted in GDP but is counted in GNP because it is paid by U.S. citizens to people living in the United States. C. counted in national income, but not in GDP. D. included in both GDP and GNP because it represents an expenditure by one group and a receipt of income by another group.