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:

Probability

The determination of the odds that an event will happen, shown as a number from 0 to 1.

Sample Mean

The average of all the values in a sample, used as an estimate of the population mean.

Population Mean

The average value of all elements in a population, where the population represents the entire set of items or individuals being studied.

Ounces

A unit of weight typically used in the United States and the United Kingdom, equal to one-sixteenth of a pound.