The Adaptive Expectations Theory Suggests That

question 99

Multiple Choice

The adaptive expectations theory suggests that:

• A)the price level that people expect in the future is based on the behavior of prices in the past.
• B)the unemployment rate adapts immediately to the inflation rate.
• C)people have perfect foresight and always predict future price levels correctly.
• D)people use all current information available to formulate their inflation expectations.
• E)people react spontaneously to price level changes and do not consider any past or present information.

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Definitions:

Assets

Resources owned by a company that have economic value and can provide future benefits.

Future Benefits

The projected economic advantages to be received from an investment, often used in evaluating the potential return from capital projects or investments.

Net Income

The amount of earnings remaining after all expenses, including taxes and costs, have been subtracted from total revenue.

Revenues

The total amount of money received by a company for goods sold or services provided during a specific period, before any deductions.