Which of the Following Statements Is True of Rational Expectations

question 96

Multiple Choice

Which of the following statements is true of rational expectations?

• A)Rational expectations forecasts are always correct.
• B)For a trader with rational expectations, the expectation of an asset's price equals the optimal price forecast.
• C)If traders have rational expectations, any announcement by a company will have an effect on its stock price, even if the market was already aware of the facts being announced.
• D)If a trader really has rational expectations, he or she was always earn a greater than normal return on his or her financial portfolio.

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Definitions:

Introversion

A personality trait characterized by a focus on internal feelings rather than external sources of stimulation, often involving the preference for solitude or small groups.

Extraversion

A personality trait characterized by outgoingness, high energy, and engagement with the external world.

Sociohistorical Context

The social and historical circumstances or conditions that influence and shape events, individuals, or communities.

Inferiority

A feeling of being lower in status or quality than others, often leading to a lack of self-esteem.