The rational expectations hypothesis suggests that
A) people are creatures of habit and tend not to change their economic behavior in the short run.
B) people are rational if they make forecasts about economic activity.
C) people use all available information to make forecasts about future economic activity and adjust their behavior to these forecasts.
D) people use all available information to make forecasts about future economic activity but often fail to adjust their behavior to these forecasts.
Ans: C) people use all available information to make forecasts about future economic activity and adjust their behavior to these forecasts.
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
Suppose that the required reserve ratio is 20 percent and you deposit $50,000 of currency into Comerica Bank
What is the potential increase in deposits in the banking system brought about by your deposit? What is the potential change in the money supply?
In Bangladesh, the government guarantees rice farmers that it will buy rice at a specific price. Explain the costs and benefits to farmers in good and bad harvest years
What will be an ideal response?
A gaming strategy in which one player states that he/she would break the agreement for eternity if his/her co-player breaks the agreement once is called:
a. a grim trigger. b. a credible threat. c. a chain-store paradox. d. a dominance pull.