If People Behave According to Rational Expectations Theory, People Would

question 22

Multiple Choice

If people behave according to rational expectations theory, people would expect the rate of inflation this year to be:

• A) the same as last year.
• B) zero, regardless of the rate last year.
• C) the rate based on predictable monetary and fiscal policies.
• D) always higher than last year.

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Definitions:

Null Hypothesis

A statement in statistical hypothesis testing that there is no significant difference between specified populations, any observed difference being due to sampling or experimental error.

Total Sample Size

The number of observations or data points collected in a statistical sample.

Chi-Squared Test Statistic

A measure used in statistics that summarizes the difference between observed and expected categorical data to assess the evidence against a null hypothesis.

Two-Tail Test

A statistical test that considers extreme values in both tails of the distribution to test for a significant difference.