Author Question: People are said to have rational expectations if they (Read 39 times)

Hungry! · **on:** Apr 19, 2019

Question 1

The rational-expectations hypothesis suggests that errors in forecasting future inflation rates are due to

◦ random, unpredictable events.
◦ the fact that people assume that the current inflation rate will continue into the future.
◦ the fact that people consistently underestimate future inflation.
◦ the fact that people consistently overestimate future inflation.

Question 2

People are said to have rational expectations if they

◦ use all available information in forming their expectations.
◦ assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years.
◦ merely guess at the inflation rate.
◦ assume that this year's inflation rate will be the same as last year's inflation rate.

sarah_brady415 · **Reply #1 on:** Apr 19, 2019

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