If Market Participants Notice That a Variable Behaves Differently Now

question 40

Multiple Choice

If market participants notice that a variable behaves differently now than in the past,then,according to rational expectations theory,we can expect market participants to

• A)change the way they form expectations about future values of the variable.
• B)begin to make systematic mistakes.
• C)no longer pay close attention to movements in this variable.
• D)give up trying to forecast this variable.

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Definitions:

Statutory Code

A codified body of law created by a legislature, dictating regulations, rights, and duties.

Criminal Law

A system of law concerned with the punishment of those who commit crimes.

Social Conduct

The behavior of individuals in a society, governed by social norms, customs, and laws.

Rule of Law

The principle that all members of a society, including those in government, are equally subject to publicly disclosed legal codes and processes.