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.
Related Mcqs:
- If people have rational expectations a monetary policy contraction that is announced and is credible could ?
A. reduce inflation with little or no increase in unemployment
B. Increase inflation but would decrease unemployment by an unusually large amount
C. increase inflation with little or no decrease in unemployment
D. reduce inflation but it would increase unemployment by an unusually large amount - 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 - 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 - 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 ?
A. Rational-expectations hypothesis
B. Passive-expectations hypothesis
C. adaptive expectations hypothesis
D. lagged-expectations hypothesis. - If, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price level then the long-run Phillips curve ?
A. is vertical
B. is negatively sloped
C. has a slope that is determined by how fast people adjust their price expectations
D. is positively sloped - 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 - If marginal benefit is greater than marginal cost, a rational choice involves ?
A. no more of the activity.
B. less of the activity
C. more of the activity
D. more or less, depending on the benefits of other activities - A rational person does not act unless ?
A. the action is ethical
B. The action produces marginal costs that exceed marginal benefits.
C. The action produces marginal benefits that exceed marginal costs.
D. The action makes money for the person. - If buyers are rational and there is no market failure ?
A. free market solutions are efficient
B. free market solutions maximize total surplus
C. all of these answers
D. free market solutions are equitable
E. free market solutions are efficient and free market solutions maximize total surplus - In the ultimatum game, what split would be rational for both the person proposing the split and the person who must accept or reject the split ?
A. There is no rational solution
B. 75/25
C. 99/1
D. 1/99
E. 50/50
