[Solved] Economists Have Focused More Attention on the Formation of Expectations
Question 33
Multiple Choice
Question 33Economists have focused more attention on the formation of expectations in recent years. This increase in interest can probably best be explained by the recognition that
A)expectations influence the behavior of participants in the economy and thus have a major impact on economic activity.
B)expectations influence only a few individuals,have little impact on the overall economy,but can have important effects on a few markets.
C)expectations influence many individuals,have little impact on the overall economy,but can have distributional effects.
D)models that ignore expectations have little predictive power,even in the short run.
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- Q34: The view that expectations change relatively slowly over time in response to new information is known in economics as A)rational expectations. B)irrational expectations. C)slow-response expectations. D)adaptive expectations.
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- Q38: The major criticism of the view that expectations are formed adaptively is that A)this view ignores that people use more information than just past data to form their expectations. B)it is easier to model adaptive expectations than it is to model rational expectations. C)adaptive expectations models have no predictive power. D)people are irrational and therefore never learn from past mistakes.
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