Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 27, Problem 9SQ
To determine
The expectation that bases on the recent past.
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Rational vs Adaptive Expectations. How are they both different from the assumption we have used up to this point? What are the policy implications of one versus the other?
Rational expectations believe that
a. the government must change government spending and taxes during inflation and deflation gaps
b. people will form the most accurate possible expectations about the future that they can, using all the available information available to them
c. the federal reserve must buy and sell government securities during inflation and deflation gaps
d. the economy will never self-correct
difference between rational expectations and adaptive expectations?
Chapter 27 Solutions
Economics For Today
Ch. 27.3 - Prob. 1YTECh. 27.6 - Prob. 1YTECh. 27 - Prob. 1SQPCh. 27 - Prob. 2SQPCh. 27 - Prob. 3SQPCh. 27 - Prob. 4SQPCh. 27 - Prob. 5SQPCh. 27 - Prob. 6SQPCh. 27 - Prob. 7SQPCh. 27 - Prob. 8SQP
Ch. 27 - Prob. 9SQPCh. 27 - Prob. 1SQCh. 27 - Prob. 2SQCh. 27 - Prob. 3SQCh. 27 - Prob. 4SQCh. 27 - Prob. 5SQCh. 27 - Prob. 6SQCh. 27 - Prob. 7SQCh. 27 - Prob. 8SQCh. 27 - Prob. 9SQCh. 27 - Prob. 10SQCh. 27 - Prob. 11SQCh. 27 - Prob. 12SQCh. 27 - Prob. 13SQCh. 27 - Prob. 14SQCh. 27 - Prob. 15SQCh. 27 - Prob. 16SQCh. 27 - Prob. 17SQCh. 27 - Prob. 18SQCh. 27 - Prob. 19SQCh. 27 - Prob. 20SQ
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- define adaptive expectations what is its main implicationarrow_forward1.True or False: Businesses and government care only about long-run economic forecasts, because they cannot adapt policy or output to accommodate short-run fluctuations. 2.Suppose the most recent data show that the average initial weekly claims for unemployment insurance have recently increased. This change suggests a )RECCESSIONARY or EXPANSIONARY) period in the coming months? 3.Economists disagree about how quickly the economy adjusts to an aggregate demand shock. In the view of some economists, people form expectations based on present realities and change expectations gradually as their experience unfolds. Such expectations are said to be rational, unexpected, adaptive, reasonable, or great ? 4. Suppose an unanticipated increase in investment spending causes the aggregate demand curve to shift to the right (from AD1AD1 to AD2AD2). According to adherents of the adaptive-expectations theory, the unanticipated change in aggregate demand will cause the economy to move in which…arrow_forwardDefine rational expectations and explain the two rational expectation theories of the business cycle?? Definition of rational expectation: ......... Rational expectations theories. ...... ......arrow_forward
- Old MathJax webview Assume the public have rational expectations. According to the model, which policy is better: A monetary authority bound by rules or discretion? Assume the public have rational expectations. According to the model, which policy is better: a monetary authority bound by rules or discretion? For my equilibrium rate of inflation my answer was 0. For my equilibrium rate of output I got 2.5.arrow_forwardHow can expectations about the future change what consumer buy now?arrow_forwardAccording to the rational-expectations approach, if everyone believes that policymakers are committed to reducing inflation, the cost of reducing inflation—the sacrifice ratio—will be lower than if the public is skeptical about the policymakers’ intentions. Why might this be true? How might credibility be achieved?arrow_forward
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