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:

Estimated Form

In statistics, it refers to the version of an equation that estimates the parameters of a model based on sample data.

Unit

A standard measurement or quantity used as a basis for counting, comparison, or calculation.

Critical Value

A threshold point on the test distribution that is compared against the test statistic to determine whether to reject the null hypothesis.

Independent Variables

Variables in an experiment that are manipulated or changed by the researcher to investigate their effect on dependent variables.