Two Alternative Theories That Hypothesize How People Form Expectations Are

question 83

Multiple Choice

Two alternative theories that hypothesize how people form expectations are:

• A) adaptive expectations theory and rational expectations theory.
• B) perfect expectations theory and adaptive expectations theory.
• C) rational expectations theory and perfect expectations theory.
• D) realistic expectations theory and perfect expectations theory.
• E) adaptive expectations theory and realistic expectations theory.

---

Definitions:

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by high unemployment, deflation, and a drop in global GDP.

Aggregate Demand

Total requisites for goods and services across an economic landscape, determined at a steady general price level over a fixed time frame.

Price Level

An index that measures the average of current prices across the entire spectrum of goods and services produced in the economy, reflecting the cost of living and inflation.

Average Price Level

The average price level is a measure of the overall level of prices in an economy over a period of time, often used to gauge inflation.