[Solved] If Market Participants Notice That a Variable Behaves Differently Now

If additional information is not used when forming an optimal forecast because it is not available at that time,then expectations are A)obviously formed irrationally. B)still considered to be formed rationally. C)formed adaptively. D)formed equivalently.

An expectation may fail to be rational if A)relevant information was not available at the time the forecast is made. B)relevant information is available but ignored at the time the forecast is made. C)information changes after the forecast is made. D)information was available to insiders only.

According to rational expectations theory,forecast errors of expectations A)are more likely to be negative than positive. B)are more likely to be positive than negative. C)tend to be persistently high or low. D)are unpredictable.

When using rational expectations,forecast errors will,on average,be ________ and ________ be predicted ahead of time. A)positive;can B)positive;cannot C)negative;can D)zero;cannot

People have a strong incentive to form rational expectations because A)they are guaranteed of success in the stock market. B)it is costly not to do so. C)it is costly to do so. D)everyone wants to be rational.

According to rational expectations A)expectations of inflation are viewed as being an average of past inflation rates. B)expectations of inflation are viewed as being an average of expected future inflation rates. C)expectations formation indicates that changes in expectations occur slowly over time as past data change. D)expectations will not differ from optimal forecasts using all available information.

On rainy days,Jennifer's commute time to work averages 45 minutes. Before leaving,Jennifer hears on the radio that a street on her route is closed due to high water. She plans to add an additional 15 minutes to her commute because of the detour. This decision represents A)rational expectations. She is changing her expectations to reflect new information. B)adaptive expectations. She is adapting her plan to what she heard. C)irrational expectations. Everyone knows that radio news is unreliable. D)irrational expectations. She should just call in sick and not get out in the bad weather.

Suppose Barbara looks out in the morning and sees a clear sky so decides that a picnic for lunch is a good idea. Last night the weather forecast included a 100% chance of rain by midday but Barbara did not watch the local news program. Is Barbara's prediction of good weather at lunch time rational? Why or why not?

The theory of rational expectations,when applied to financial markets,is known as A)monetarism. B)the efficient markets hypothesis. C)the theory of strict liability. D)the theory of impossibility.

According to the efficient markets hypothesis,the current price of a financial security A)is the discounted net present value of future interest payments. B)is determined by the lowest successful bidder. C)fully reflects all available relevant information. D)is a result of none of the above.