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:

Shock Subjects

Individuals subjected to electric shocks in experimental settings, often used to study responses to stress or authority.

Initial Compliance

The initial willingness to go along with a request or follow a rule or guideline, often before any form of resistance or refusal is considered.

Personal Responsibility

The concept of acknowledging and accepting the choices one makes and the consequences that follow.

Authority Figure

An individual who holds power or influence in a societal structure, often seen as a source of guidance or enforcement of rules and standards.