The Adaptive Expectations Hypothesis Implies That People

question 86

Multiple Choice

The adaptive expectations hypothesis implies that people

• A) adjust their expectations quickly to policy changes.
• B) expect the next period to be pretty much like the recent past.
• C) will always be correct in their forecast for the next period.
• D) change their expectations about the future if policy changes.

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Definitions:

Journal Entry

A record of financial transactions in the accounting system of a business, consisting of debits and credits.

Elimination Entry

Elimination entry involves making accounting entries in consolidated financial statements to remove the effects of intercompany transactions.

Contingent Consideration

A future payment in a transaction that is dependent on specific outcomes or events.

IFRS 3

Refers to the International Financial Reporting Standard that covers the accounting treatment for all business combinations, including the recognition and measurement of goodwill and determination of fair value for identifiable assets and liabilities.