The hypothesis that people know the true model of the economy and that they use this model to form their expectations of the future is the ?

Related Mcqs:

1. Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

   A. faster economic growth than Japan
   B. higher future interest rates than Japan
   C. more rapid money supply growth than japan
   D. higher inflation rates than japan

2. The rational-expectation hypothesis suggests that the forecasts that people make concerning future inflation rates ?

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

3. Refer to Exhibit 6. Suppose the economy is operating at point (D) As people revise their price expectations ?

   A. The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 3 percent inflation
   B. The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 9 per cent inflation
   C. The short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 6 percent inflation
   D. The long-run Phillips curve will shift to the left

4. Suppose the economy is initially in long run equilibrium Then suppose there is a drought that destroys much of the wheat crop if policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model to aggregate demand and aggregate supply what happens to prices and output in the long run ?

   A. Output rises; prices are unchanged from the initial value
   B. Output and the price level are unchanged from their initial values
   C. Output falls; prices are unchanged from the initial value
   D. Prices fall; output is unchanged from its initial value

5. Refer to Exhibit 6.If People in the economy expect inflation to be 6 percent but inflation turn out to be 3 percent the economy is operating at point ?

   A. H
   B. c
   C. d
   D. F

6. Refer to Exhibit 6.If People in the economy expect inflation to be 3 percent and inflation is 3 percent the economy is operating at point ?

   A. b
   B. I
   C. a
   D. H

7. Which example of market expectations causes the dollar to depreciate against the yen – expectation that the U.S economy will have ?

   A. faster growth than Japan
   B. higher future interest rates than Japan
   C. more rapid money supply growth than Japan
   D. lower inflation rates than Japan

8. People are said to have rational expectations if they ?

   A. assume that this year’s inflation rate will be the same as last year’s inflation rate
   B. merely guess at the inflation rate.
   C. assume that this year’s inflation rate will be equal to the average inflation rate over the past 10 years
   D. Use all available information in forming their expectations.

9. Refer to Exhibit 6. Suppose the economy is Operating in long-run equilibrium at point E. In the long run a monetary contraction will move the economy in the direction of point ?

   A. F
   B. a
   C. H
   D. I

10. Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers allow the economy to adjust to the long run natural rate on its own, ?

    A. People will reduce their price expectations and the short run aggregate supply will shift right
    B. People will raise their price expectations and aggregate demand will shift left
    C. People will raise their price expectations and the short run aggregate supply will shift left
    D. People will reduce their price expectations and aggregate demand will shift right