If Samantha Predicts Future Inflation Based on Rational Expectations, Then

question 5

Multiple Choice

If Samantha predicts future inflation based on rational expectations, then

• A)she never underestimates inflation.
• B)she uses all relevant information to forecast 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:

Heckscher-Ohlin Model

An economic theory that suggests that countries export what they can most efficiently and abundantly produce, based on their factors of production.

Labor-Intensive

A process or industry that requires a large amount of labor to produce its goods or services, typically compared to the amount of capital required.

Labor-Abundant

Referring to countries or regions that have a high supply of labor relative to capital, often resulting in lower labor costs.

World Trade Organization

An international organization that regulates international trade and ensures the smooth and free flow of trade between countries.