Author Question: Compare the following three ways to model expectations: animal spirits, adaptive expectations, and ... (Read 136 times)

meagbuch · **on:** Jun 30, 2018

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 · **Reply #1 on:** Jun 30, 2018

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