Which of the Following Statements About Expectations Theory Is True

question 123

Multiple Choice

Which of the following statements about expectations theory is true?

• A) Adaptive expectations theory implies that people form expectations on the basis of all available information.
• B) Rational expectations theory implies that people's expectations of future inflation are based on their most recent experiences.
• C) Rational expectations theory does not imply that people always predict inflation correctly.
• D) Adaptive expectations theory identifies prediction errors as random.
• E) Rational expectations theory was developed before adaptive expectations theory.

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