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Both Adaptive Expectations and Rational Expectations Are Prone to Error

question 56

Essay

Both adaptive expectations and rational expectations are prone to error (a discrepancy between the expectation and the actual experience).In each case,how does error affect the formation of new expectations?


Definitions:

Strictly Liable

Refers to the legal responsibility of a party for damages or loss, regardless of fault or negligence.

Reasonable Person

A reasonable person is a legal standard used to represent a hypothetical person who exercises average care, skill, and judgment in conduct, serving as a comparative standard in negligence cases.

Law of Torts

A component of civil law dealing with the compensation of victims for harm caused by someone’s negligence or intentional acts.

Standard of Care

The degree of attentiveness, caution, and prudence that a reasonable person in the circumstances would exercise.

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