In the View of Rational Expectations Theory

question 254

Multiple Choice

In the view of rational expectations theory,

• A) people make economic forecasts that are based on insider-outsider relationships and self- fulfilling prophecies.
• B) people form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur.
• C) people form their expectations on present realities and only gradually change their expectations as experience unfolds.
• D) the economy does not respond quickly to changes in prices, which causes a misallocation of economic resources.

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Definitions:

Republican Supporters

Individuals or groups that endorse the Republican Party, its candidates, or its principles, typically in the context of U.S. politics.

Deport

To forcibly remove a person from a country, typically based on legal grounds or as a consequence of violating immigration laws.

Recession

An interval of brief economic contraction characterized by diminished trade and industrial output, usually noted by a decline in GDP for two successive quarters.