The Hypothesis That People Know the "True Model" of the Economy

question 70

Multiple Choice

The hypothesis that people know the "true model" of the economy and that they use this model to form their expectations of the future is the

• A) real business cycle hypothesis.
• B) Lucas supply function hypothesis.
• C) rational-expectations hypothesis.
• D) Laffer hypothesis.

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Definitions:

Public Benefit

A positive outcome or advantage that serves the general population or community at large.

Equilibrium Price

The price at which the quantity of a product demanded by consumers and the quantity supplied by producers are equal.

Government Tax

Required payments to the government, deducted from workers' salaries and company earnings, or applied to the prices of specific items, services, and activities.

Tax Revenue

Consists of the income that a government gains from taxation, which is used to fund public services and obligations.