The Rational Expectations Hypothesis States That

question 42

Multiple Choice

The rational expectations hypothesis states that

• A) the government combines the effects of past policy changes on important economic variables with accepted views about the effects of current and future policy changes.
• B) people combine the effect of past policy changes on important economic variables with unpredictable views on what policy makers will do to determine what the economy will do in the future.
• C) people combine the effects of past policy changes on important economic variables with their own judgments about the future effects of current and future policy changes.
• D) people understand how the economy operates and use their knowledge in making expectations about the future, but are uninformed about how fiscal and monetary policies are made and carried out.

---

Definitions:

Hostile Takeover

An acquisition attempt by a company or individual against the wishes of the company's management and board of directors.

Corporate Shell

A legal entity with no significant assets or operations, often used to facilitate business transactions like mergers or to hold assets.

Control Block

An interest controlling 50% of outstanding votes plus one; thereby it may decide the fate of the firm.

Corporate Takeover

The acquisition of one company by another, either through direct purchase or through the accumulation of a majority of its stock shares.