If People Assume That Future Rates of Inflation Will Follow

question 136

Multiple Choice

If people assume that future rates of inflation will follow the pattern of inflation rates in the past,they are said to have

• A)rational expectations.
• B)adaptive expectations.
• C)unstable expectations.
• D)accommodative expectations.

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Definitions:

Perfectly Competitive

A market configuration where numerous small businesses are present, with each selling identical items, coupled with the absence of entry or exit hurdles and complete transparency of information among consumers and vendors.

Optimal Output

The level of production that results in the highest possible profit for a firm, determined by the point where marginal cost equals marginal revenue.

Short-Run Costs

Expenses that vary directly with the level of output in the short term, where at least one input is fixed.

Economic Profit

A firm's total revenue minus its explicit and implicit costs, representing the additional benefit above the normal rate of return.