Which Statement Best Characterizes the Theory of Rational Expectations

question 44

Multiple Choice

Which statement best characterizes the theory of rational expectations?

• A) It suggests that estimates of the sacrifice ratio should be used to guide policy.
• B) It concerns how people use information to predict the future.
• C) It explains why the long-run Phillips curve is vertical.
• D) It explains how people act when there is unemployment and workers must be rationed.

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Definitions:

Source Traits

Fundamental characteristics that underlie an individual's behavior, forming the foundation of their personality.

16 PF Test

A personality test that measures sixteen personality factors, used for psychological evaluation.

Factor Analysis

A statistical technique that explains the variance among observed, related variables through a smaller number of latent variables, known as factors.

Genetically Based

Characteristics or traits that are influenced by genes inherited from one's parents.