If People Have Rational Expectations,then They

question 67

Multiple Choice

If people have rational expectations,then they

• A) are correct at least 50% of the time.
• B) do not make systematic and correctable errors in prediction.
• C) sometimes overestimate,but never underestimate,economic variables.
• D) revise their expectations upward when their predictions are too low and downward when they are too high.

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Definitions:

Secondarily Liable

Responsibility or liability that kicks in when the primarily responsible party fails to fulfill their obligations.

Accommodation Party

A person who signs a negotiable instrument for the purpose of lending their reputation to someone else on the instrument, without direct benefit.

Negotiable Instrument

A written document that promises or orders the payment of a fixed amount of money, with the capability of being transferred to another party.

Presentment

The act of making a demand for the drawee to pay.