Rational Expectations Are Forecasts

question 7

Multiple Choice

Rational expectations are forecasts

• A)that, while not necessarily correct, are the best that can be made given the available data.
• B)that are technically correct.
• C)that accurately predict the short-term trade-off between inflation and unemployment.
• D)made by economists using the most sophisticated econometric models.

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the direct costs of production.

Variable Overhead

Costs that vary with the level of production or business activity, such as utilities or indirect materials.

Direct Material

Raw materials and components that are directly incorporated into a finished product and can be easily traced to the product.

Direct Labor-Hours

A measure of the hours worked by employees directly involved in the production process.