The Rational Expectations Hypothesis Assumes That Individuals Will

question 78

Multiple Choice

The rational expectations hypothesis assumes that individuals will

• A) never make forecasting errors.
• B) be as likely to overestimate as to underestimate the future rate of inflation.
• C) continually make systematic forecasting errors.
• D) ignore past forecasting errors when formulating predictions.

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Definitions:

Proprietary Fund Types

Types of funds used by governmental entities to account for activities similar to those found in the private sector, where the intent is to recover costs through user charges.

Internal Service Funds

Funds used by a government entity to account for the services provided by one department to other departments on a cost-reimbursement basis.

Enterprise Funds

Governmental accounting funds used to account for operations financed and operated in a manner similar to private business enterprises, where the intent is that the costs are financed primarily through user charges.

Non-Exchange Transactions

Transactions where an entity receives value without directly giving equivalent value in exchange, often seen in grants, donations, and government assistance.