The rational expectations hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.
Answer the following statement true (T) or false (F)
True
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If the demand for cigarettes is highly inelastic, this indicates that:
a. higher cigarette prices will increase the demand for cigarettes. b. the price elasticity coefficient of cigarettes exceeds 1. c. the price elasticity coefficient of cigarettes equals 1. d. the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.
Figure 5-15
Hal initially consumes the combination marked as A in Figure 5-15. After his income increases, Hal consumes combination B. We can conclude that Hal views
a.
X as an inferior good and Y as a noninferior good.
b.
X as a noninferior good and Y as an inferior good.
c.
both X and Y as noninferior goods.
d.
both X and Y as inferior goods.
A decrease in the reserve requirement:
A. increases the money supply, which leads to increased interest rates and a fall in investment spending. B. increases the money supply, which leads to decreased interest rates and a rise in investment spending. C. decreases the money supply, which leads to increased interest rates and a fall in investment spending. D. decreases the money supply, which leads to decreased interest rates and a rise in investment spending.
Which of the following will cause a shift in the demand curve of labor?
A. a decline in the price of a complementary input B. an increase or decrease in the productivity of labor C. an increase or decrease in the demand for the product labor produces D. all of these