The Rational Expectations Hypothesis Is a Theory That States That

question 61

Multiple Choice

The rational expectations hypothesis is a theory that states that

• A)individuals can predict the future perfectly,at least with respect to macroeconomic variables like the interest rate and inflation.
• B)people make their economic plans by using all available past and present information and their understanding about how the economy operates.
• C)people make their economic plans in an irrational,intuitive manner.
• D)people make their economic plans by relying on the policy statements made by the Prime Minister and leaders in Parliament.

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Definitions:

Technique

A specific method or way of doing something, often referring to a skillful or efficient way of accomplishing a task.

Populations

In statistics, it refers to the entire group of individuals or items that is the subject of a study.

Categories

Categories refer to classes or divisions in a classification system that group items, ideas, or entities based on common characteristics or attributes.

Chi-squared Goodness-of-fit

Chi-squared Goodness-of-fit tests how well observed data matches the expected data distribution in categories.