The Rational Expectations Approach Differs from the Perfect Foresight Approach

question 35

Multiple Choice

The rational expectations approach differs from the perfect foresight approach, since it assumes that

• A)markets do not clear rapidly
• B) people make systematic errors in their forecasts
• C)the monetary policy multiplier is always zero
• D)people may not always be right but their best guess of the forecast error is zero
• E)none of the above

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Definitions:

Descartes

A 17th-century French philosopher, mathematician, and scientist who made significant contributions to the development of modern philosophy and the theory of knowledge.

Artistic Relics

Historical objects or pieces of art which hold cultural, religious, or sentimental value, often preserved due to their significance.

Emotional Expressions

The way emotions are outwardly displayed and communicated to others through facial expressions, voice pitch, body language, and other behaviors.

Darwin

Charles Darwin, a 19th-century naturalist, geologist, and biologist known for his theory of evolution through natural selection.