Compare the following three ways to model expectations: animal ...

[meagbuch]

Compare the following three ways to model expectations: animal spirits, adaptive expectations, and rational expectations.
 
  What will be an ideal response?

Question 2

The capital ratio is the ratio of a bank's
 
  A) assets divided by its liabilities.
  B) income divided by its assets.
  C) capital divided by its assets.
  D) capital divided by its total liabilities.

[juwms]

Answer to Question 1

Animal spirits assumed that expectations were simply random. Adaptive expectations assumed that individuals formed expectations by looking at past changes in a variable. Rational expectations assumed that individuals form expectations by using all currently available information and an understanding of the model and policy.

Answer to Question 2

C

[meagbuch]

Wow, this really help

[31809pancho]

Thanks for the timely response, appreciate it