The Rational-Expectations Hypothesis Suggests That the Forecasts That People Make

question 107

Multiple Choice

The rational-expectations hypothesis suggests that the forecasts that people make concerning future inflation rates

• A) are always correct.
• B) consistently overestimate the actual rate of inflation in the future.
• C) are correct on average, but are subject to errors that are distributed randomly.
• D) consistently underestimate the actual rate of inflation in the future.

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Definitions:

International Organizations

Entities established by treaties between sovereign states that aim to facilitate cooperation in international law, security, economic development, or social equity.

Macrostructures

are overarching patterns of social relations that lie outside and above a person’s circle of intimates and acquaintances. Macrostructures include classes, bureaucracies, and power systems, such as patriarchy.

Postindustrialism

Postindustrialism describes the phase of economic and social development that follows industrialization, characterized by an economy focused on services and information rather than manufacturing.

Global Structures

are patterns of social relations that lie outside and above the national level. They include international organizations, patterns of worldwide travel and communication, and the economic relations between countries.