According to the Rational Expectations School, What Do People Base

question 93

Multiple Choice

According to the rational expectations school, what do people base their expectations about inflation on?  

• A) on the announcement of a change in inflation policy 
• B) on weighted averages of previous inflation rates, with the most distant getting the heaviest weight 
• C) on all information available to them 
• D) on changes in monetary and fiscal policy

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Definitions:

Economic Rent

Income derived from the ownership of a factor of production that is in fixed supply, exceeding what is necessary to keep it in its current use.

Employment Gains

The increase in the number of people who are employed, reflecting positive growth in the job market.

Productivity Growth

An increase in the efficiency of producing goods and services, measured by the output per unit of input over a specified period.

Real Wages

Wages adjusted for inflation, reflecting the purchasing power of income.