The Theory of Rational Expectations Suggests That the Forecasts Made

question 123

Multiple Choice

The theory of rational expectations suggests that the forecasts made using the rational expectations model:

• A) consistently underestimate the actual rate of inflation in the future.
• B) are correct on average.
• C) consistently overestimate the actual rate of inflation in the future.
• D) are always correct.

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Definitions:

Computer Software

Programs and operational information that run on computers, directing the computer's hardware to perform specific tasks.

Computers

Electronic devices capable of executing a set of instructions to perform various tasks, including processing, storing, and displaying information.

Price

The total of money that is predicted, demanded, or delivered in settlement for a product.

Law of Demand

A principle in economics that states the quantity demanded of a good falls as the price rises, and vice versa, all else being equal.