The Argument in Favor of Rational Expectations Is That

question 203

Multiple Choice

The argument in favor of rational expectations is that

• A) people will continue to acquire information as long as the marginal benefit of that information is positive.
• B) individuals have a very good idea of what to expect from the government in terms of monetary policy but not fiscal policy.
• C) it is costless for individuals and firms to form rational expectations.
• D) if expectations were not rational, there would be unexploited profit opportunities available.

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Definitions:

Vesicles

Small membrane-bound sacs in cells used for the transport, storage, and digestion of substances.

Electron Microscope

A type of microscope that uses a beam of electrons to create an image of the specimen with much higher resolution than a light microscope.

Selectively Permeable Membrane

A membrane that allows certain molecules or ions to pass through it by diffusion and occasionally specialized processes, crucial in maintaining the cell environment.

Osmosis

The movement of water molecules through a selectively permeable membrane from a region of lower solute concentration to one of higher concentration.