If Expectations Are Rational

question 56

Multiple Choice

If expectations are rational,

• A)a predictable change in inflation can make the expected inflation rate deviate from the actual rate.
• B)unemployment can exceed the full-employment rate even in the long run.
• C)the difference between the actual inflation rate and the expected inflation rate must be a purely random number.
• D)the inflation rate cannot be reduced without a period of high unemployment because the Phillips curve is downward sloping.

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Definitions:

Business Division

A distinct part of a large company that operates under the firm's umbrella but focuses on a particular area of business or market segment.

Break-even Sales

The amount of revenue required to cover both the fixed and variable costs of production, resulting in no net profit or loss.

Common Fixed Expenses

Expenses that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance.

Operating Period

The span of time during which a business or a particular machinery is operational or in use.