If People Assume That Future Rates of Inflation Will Follow

question 136

Multiple Choice

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

• A)rational expectations.
• B)adaptive expectations.
• C)unstable expectations.
• D)accommodative expectations.

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Definitions:

Standard Price

The predetermined cost expected to be paid for goods and services under normal conditions.

Direct Materials

Raw materials that are directly involved in the manufacturing of a product and can be easily traced to it.

Direct Labour

The wages paid to workers directly involved in the production of goods or services.

Labour Efficiency Variance

The difference between the budgeted or standard labor hours expected for production and the actual labor hours used.