The Rational Expectations Hypothesis Indicates That People

question 58

Multiple Choice

The rational expectations hypothesis indicates that people

• A) pay little attention to policy when forming their expectations about the future.
• B) expect the next period to be pretty much like the recent past, regardless of policy changes.
• C) will always be able to forecast the future accurately.
• D) change their expectations about the future if policy changes.

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Definitions:

Perspective

A particular attitude toward or way of regarding something; a point of view.

Mental Disorder

A health condition characterized by alterations in thinking, mood, or behavior associated with distress or impaired functioning.

Sickness

A state of being ill or unhealthy in body or mind.

Biological

Pertaining to the science of life or living organisms, often emphasizing genetic, anatomical, and physiological aspects.