According to the Rational Expectations Theory

question 23

Multiple Choice

According to the rational expectations theory,

• A) on average people have very little idea of what to expect from government policy makers.
• B) people form expectations by focusing only on the private sector.
• C) people do not consider likely government policies when forming expectations.
• D) people form expectations, in part, by considering the probable future effects of changes in government policy.

---

Definitions:

Tax Evasion

The illegal practice of not paying taxes by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed.

FDA Violations

FDA violations refer to breaches of the regulations set by the U.S. Food and Drug Administration, concerning the safety, manufacturing, and marketing of food, drugs, and medical devices.

Actively-managed Mutual Funds

Mutual funds where managers actively make investment decisions in an attempt to outperform a specific benchmark.

Underperformance

A return on an investment that is lower than the benchmark or expectations.