If Expectations Are Formed Rationally

question 20

Multiple Choice

If expectations are formed rationally:

• A) then activist monetary policy may yield no gains whatsoever.
• B) then monetary policy has real effects in the long run.
• C) then inflation will only hurt lenders and not borrowers.
• D) then inflation will only hurt borrowers and not lenders.
• E) then individuals expect inflation equal to their most recent experience.

Identify strategies to reduce type I and type II errors.

Understand the concept of statistical power and how it relates to hypothesis testing.

Know the implications of sample size manipulation on error probabilities.

Understand the significance of effect sizes in interpreting experimental results.

---

Definitions:

Unamortized Patent

The portion of a patent's cost that has not yet been expensed through amortization, representing an intangible asset on the balance sheet.

Adjustment Necessary

Refers to the modifications required to correct or update financial records or statements to ensure accuracy and compliance with accounting principles.

Equipment Account

An account on the balance sheet representing the cost of equipment owned by a company, less accumulated depreciation.

Unamortized Patent

The portion of a patent's purchase cost that has not yet been expensed through amortization in the income statement.