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:

Selling Price

The amount of money a buyer pays to acquire a product or service from a seller.

Absorption Costing

An accounting method that includes all production costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Markup Percentage

The percentage added to the cost of goods to cover overhead and profit, calculated as markup divided by the cost of the goods.

Selling Price

The amount of money for which a product is sold to the customer; it may include costs such as manufacturing, distribution, and markup.