One Major Assumption of the Theory of Rational Expectations Is

question 245

Multiple Choice

One major assumption of the theory of rational expectations is that

• A)all firms use rational expectations.
• B)the economy does not have a self-correction mechanism.
• C)the economy has a very effective self-correction mechanism.
• D)all consumers use rational expectations.

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Definitions:

Stockholders' Equity

Stockholders' Equity refers to the residual interest in the assets of a corporation after deducting liabilities, represented by capital stock, retained earnings, and possibly other components.

Increase Expenses

Refers to the rise in costs or expenditures that a company may experience as part of its operations.

Earning Revenue

The income a company generates from its business activities, typically from the sale of goods or services.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the owners' claim on the business assets.