In the View of Rational Expectations Theory

question 109

Multiple Choice

In the view of rational expectations theory:

• A) People make economic forecasts that are based on insider-outsider relationships and self-fulfilling prophecies
• B) People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur
• C) People form their expectations on present realities and only gradually change their expectations as experience unfolds
• D) The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources

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Definitions:

Combined Margin

A financial metric that calculates the total profitability of a product by combining different types of margins, such as gross and net margins.

Investment Opportunity

A financial investment or venture that has the potential to yield returns or profits to the investor.

Company

A business or association of persons engaged in commercial, industrial, or professional activities, either incorporated or unincorporated.

Return on Investment (ROI)

A measure of the profitability of an investment, expressed as a percentage of the initial amount invested.