Author Question: During a time when the inflation rate is increasing each year for a number of years, are adaptive ... (Read 40 times)

kamilo84

  • Sr. Member
  • ****
  • Posts: 495
During a time when the inflation rate is increasing each year for a number of years, are adaptive expectations or rational expectations likely to give the more accurate forecasts? Briefly explain.
 
  What will be an ideal response?

Question 2

The automatic budget surpluses and budget deficits that occur in the federal budget over the business cycle
 
  A) stabilize the economy. B) destabilize the economy.
  C) decrease potential GDP. D) increase potential GDP.



kjo;oj

  • Sr. Member
  • ****
  • Posts: 328
Answer to Question 1

Rational expectations are likely to give the more accurate forecasts. When inflation is increasing over time, adaptive expectations that rely only on past information will always lead to a lower inflation forecast than actual inflation.

Answer to Question 2

A



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The human body's pharmacokinetics are quite varied. Our hair holds onto drugs longer than our urine, blood, or saliva. For example, alcohol can be detected in the hair for up to 90 days after it was consumed. The same is true for marijuana, cocaine, ecstasy, heroin, methamphetamine, and nicotine.

Did you know?

The first oral chemotherapy drug for colon cancer was approved by FDA in 2001.

Did you know?

The lipid bilayer is made of phospholipids. They are arranged in a double layer because one of their ends is attracted to water while the other is repelled by water.

Did you know?

About 100 new prescription or over-the-counter drugs come into the U.S. market every year.

Did you know?

For high blood pressure (hypertension), a new class of drug, called a vasopeptidase blocker (inhibitor), has been developed. It decreases blood pressure by simultaneously dilating the peripheral arteries and increasing the body's loss of salt.

For a complete list of videos, visit our video library