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:

Ethnocentrism

The belief in the inherent superiority of one's own ethnic group or culture.

Cognitive Source

The mental processes involved in the acquisition of knowledge, understanding through thought, experience, and the senses.

Ethnocentrism

The belief in the superiority of one's own ethnic group or culture over others.

Discrimination

Unjust or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, or sex.