John and Angel Are Having an Argument Over Future Inflation

question 48

Multiple Choice

John and Angel are having an argument over future inflation rates. John thinks the rate will be 3%, because inflation has not exceeded that rate in more than a decade. Angel points out that the chairman of the Federal Reserve testified before Congress last week that she thinks the unemployment rate is too far above its natural rate and thus that the economy should be stimulated. John is using _____ expectations and Angel is relying on _____ expectations.

• A) rational; adaptive
• B) adaptive; rational
• C) improper; proper
• D) anticipated; unanticipated

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Definitions:

Simulation Results

The output or outcomes generated from running a computer-based model that represents a real-world system.

Process Simulation

The use of computer software to model the operation of an entire process or system to study its behavior and performance under different conditions.

Probability Distributions

A mathematical function that describes the likelihood of obtaining the possible values that a random variable can take.

Jockeying

The strategic maneuvering or positioning, often within a competitive environment, to gain advantage or to optimize one’s situation.