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248 Frederic S. Mishkin Economics of Money, Banking, and Financial Markets, Seventh Edition

55)

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.

Answer:

Question Status: Previous Edition

56)

According to rational expectations,

(a)

people often change their expectations quickly when faced with new information.

(b)

people will use more information than just past data on a single variable to form their expectations of that variable.

(c)

expectations will not differ from optimal forecasts (the best guess of the future) using all available information.

(d)

all of the above are true.

(e)

only (a) and (b) of the above are true.

Answer:

Question Status: Previous Edition

57)

According to rational expectations,

(a)

people will use more information than just past data on a single variable to form their expectations of that variable.

(b)

expectations will not differ from optimal forecasts (the best guess of the future) using all available information.

(c)

because people use all available information, the prediction represented by the expectation will always be perfectly accurate.

(d)

all of the above are true.

(e)

only (a) and (b) of the above are true.

Answer:

Question Status: Revised

58)

According to rational expectations,

(a)

expectations will not differ from optimal forecasts using all available information.

(b)

because people use all available information, the prediction represented by the expectation will always be perfectly accurate.

(c)

the forecast using all available information must be correct on average.

(d)

only (a) and (b) of the above are true.

(e)

only (a) and (c) of the above are true.

Answer:

Question Status: Previous Edition

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