If traders in a market have rational expectations, then
A) the price of an asset equals its fundamental value.
B) prices of riskier assets are higher than prices of less risky assets.
C) past prices of assets do not affect market participants' expectations of future asset prices.
D) they make use of less information than they would if they had adaptive expectations.
A
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Which of the following statements about the public debt is TRUE?
A) It is equal to the budget deficit. B) It decreases when the government runs a budget deficit. C) It is a stock variable. D) all of the above
In a circular flow diagram,
i. the value of production = income. ii. the value of production = expenditure. iii. expenditure = income. A) i and ii are true statements. B) i and iii are true statements. C) Only iii is a true statement. D) Only i is a true statement. E) i, ii and iii are true statements.
The horizontal-equity principle of taxation is not easy to use in practice because
A) different people receive different levels of government benefits even if their incomes are the same. B) people can use tax loopholes to reduce their incomes below the incomes of other taxpayers. C) it is difficult to determine whether people are in the same economic situation. D) some people engage in rent seeking to reduce their taxes below the level other people pay.
When there are large federal budget deficits, the trade deficit tends to shrink
a. True b. False Indicate whether the statement is true or false