Under Rational Expectations

question 16

Multiple Choice

Under rational expectations,

• A)people use all the information at their disposal to make their best forecast of the coming rate of inflation.
• B)people use all past rates of inflation to make their best forecast of the coming rate of inflation.
• C)people use announcements by the Fed to make their best forecast of the coming rate of inflation.
• D)people use only the Fed's inflation target to make their best forecast of the coming rate of inflation.
• E)people use the unemployment rate to make their best forecast of the coming rate of inflation.

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Definitions:

U.S. GDP

The total market value of all goods and services produced within the United States over a specific time period.

Total Dollars

Refers to the aggregate amount of currency in various forms within a particular economic context.

Import Tariffs

Taxes imposed by a government on goods imported from other countries to protect domestic industries or to generate revenue.

Quotas

Quotas are limits set by a government on the amount of a particular commodity that can be imported or produced domestically in a certain period, used as a means to regulate trade and support local industries.