Which of the Following Statements Is Consistent with the Rational

question 221

Multiple Choice

Which of the following statements is consistent with the rational expectations hypothesis?

• A) When it comes to making personal economic decisions, people rarely behave in a rational manner.
• B) People combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes.
• C) When it comes to making personal economic decisions, people always behave in a rational manner.
• D) Every person in the economy is always correct in her predictions about current and future policy changes.

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Definitions:

Income From Operations

The profit generated from a business's core activities, excluding revenues and expenses from non-operational activities.

Invested Assets

Invested assets refer to the total of all investments held by an individual or institution, including stocks, bonds, real estate, and other financial assets.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit from the investment by its original cost.

Divisional Performance

Assessment of the financial and operational effectiveness of a distinct business unit within a larger corporation, often reviewed to make strategic improvements.