The rational-expectations hypothesis suggests that errors in forecasting future inflation rates are due to
A. the fact that people consistently underestimate future inflation.
B. the fact that people assume that the current inflation rate will continue into the future.
C. the fact that people consistently overestimate future inflation.
D. random, unpredictable events.
Answer: D
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If the number of potential workers in a country is 25 million, and the size of the labor force in the country is 17 million, the number of adults not in the work force will equal:
A) 43 million. B) 8 million. C) 25 million. D) 17 million.
If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the
a. consumer has consumer surplus of $5 if he buys the good. b. consumer does not purchase the good. c. price of the good will rise due to market forces. d. market is out of equilibrium.
Patrice owns a travel agency. Her accountant most likely includes which of the following costs on her financial statements?
a. wages Patrice could earn giving tennis lessons b. dividends Patrice's money was earning in the stock market before Patrice sold her stock and leased the space for her travel agency c. the cost of utilities for operating the storefront d. Both b and c are correct.
A reduction in the central bank's inflation target shifts the dynamic aggregate demand curve to the left resulting in:
A. higher current output and higher inflation. B. lower current output and higher inflation. C. higher current output and lower inflation. D. lower current output and lower inflation.