If Samantha Predicts Future Inflation Based on Rational Expectations, Then

question 37

Multiple Choice

If Samantha predicts future inflation based on rational expectations, then

• A) she uses all relevant information to forecast inflation.
• B) she never under estimates inflation.
• C) she looks only to the past to help her predict future inflation.
• D) her forecast of inflation will always be correct.

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Definitions:

Debt Securities

Financial instruments representing money borrowed by the issuer that must be repaid, such as bonds, notes, and bills.

Interest Rates

The percentage of a sum of money charged for its use, typically expressed as an annual percentage.

Capital

Financial assets or resources that individuals or companies use to fund their business operations and investments.

Bond Prices

The trading price of bonds in the market, which can vary based on interest rates, the bond's credit quality, and other factors, inversely related to changes in interest rates.