The rational expectations hypothesis is based on the assumption that
A) individuals combine effects of past policy actions with their own judgment about future policy effects and changes when forming their expectations.
B) individuals adapt in response to past policy actions and changes without looking ahead when forming their expectations.
C) firms pay above equilibrium wages to their employees.
D) most firms operate in a less than competitive environment.
Answer: A) individuals combine effects of past policy actions with their own judgment about future policy effects and changes when forming their expectations.
You might also like to view...
If the price of hamburger rises, we would expect the demand for steak to shift to the right.
Answer the following statement true (T) or false (F)
Scalping and other black market activities arise when
A) the prices of goods are allowed to adjust to their equilibrium levels. B) the quantities of goods demanded and supplied are allowed to adjust to their equilibrium levels. C) the prices of goods are restricted to levels above equilibrium prices. D) the prices of goods are restricted to levels below equilibrium prices.
The average level of tariffs on imported products charged by industrialized countries changed between 1946 and 1990
a. from 5 percent to 40 percent. b. from 40 percent to 5 percent. c. from 10 percent to 20 percent. d. from 20 percent to 10 percent.
Suppose the number of picture frames purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, picture frames would be classified as
a. inferior goods. b. normal goods. c. elastic goods. d. inelastic goods.