Which Statement Best Characterizes the Theory of Rational Expectations

question 44

Multiple Choice

Which statement best characterizes the theory of rational expectations?

• A) It suggests that estimates of the sacrifice ratio should be used to guide policy.
• B) It concerns how people use information to predict the future.
• C) It explains why the long-run Phillips curve is vertical.
• D) It explains how people act when there is unemployment and workers must be rationed.

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Definitions:

Secured

Protected by collateral or a guarantee, often referring to loans or obligations.

Unregistered Mortgage

A mortgage that has not been formally recorded with the relevant legal or government authorities, potentially affecting its enforceability.

Default

The failure to fulfill a legal obligation, such as not making a payment on a loan.

Equity of Redemption

The right of a borrower to reclaim property put up as collateral after clearing their debt, especially in relation to mortgage agreements.