If People Base Their Forecasts on Rational Expectations, Their Forecast

question 27

Multiple Choice

If people base their forecasts on rational expectations, their forecast is the:

• A)only forecast based on previous observations.
• B)best possible forecast based on all private information.
• C)best possible forecast based on past observations.
• D)best possible forecast based on all public information.

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Definitions:

Imports

Goods or services brought into one country from another for the purpose of being sold or used, contributing to the domestic supply of products.

Trade Deficit

Occurs when a country's imports of goods and services exceed its exports, leading to a negative balance of trade.

Net Capital Outflow

Disparity in investment activities, with locals buying assets internationally, in contrast to foreigners buying domestically.

Net Exports

The net amount obtained by subtracting a nation's total imports from its total exports.