If Expectations Are Rational

question 56

Multiple Choice

If expectations are rational,

• A)a predictable change in inflation can make the expected inflation rate deviate from the actual rate.
• B)unemployment can exceed the full-employment rate even in the long run.
• C)the difference between the actual inflation rate and the expected inflation rate must be a purely random number.
• D)the inflation rate cannot be reduced without a period of high unemployment because the Phillips curve is downward sloping.

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Definitions:

Capital Expenditures Budget

A budget summarizing plans for acquiring fixed assets.

Operating Budgets

Detailed plans that outline expected revenue and expenses over a certain period, focusing on the day-to-day operations of an organization.

Continuous Budgeting

A method of budgeting that provides for maintaining a 12-month projection into the future.

Budget Procedure

The process of creating a plan to allocate resources and predict income and expenditures over a specific period.