the rational expectations theory assumes that market participants formulate their expectations solely on the basis of past informati market participants formulate their expectations on the basis of past, present, and projected future information. market participants lack rational economic behavior. market participants have perfect foresight. market participants are slow to learn of new policies.
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- Which of the following expectations will NOT increase spending? a. Employment b. Laying off c. Maturity of Investment d. PromotionConsumers expectations do not effect demand.Select one:a. Falseb. TrueWhich theory states that people make decisions based on information they've gathered? A. Life-cycle theory B. Theory of rational expectations C. Keynesian theory D. Theory of adaptive expectations
- How can expectations about the future change what consumer buy now?Can you explain the . pure expectation theory, preferred habbit theory, biased expectations theory and market segmentation theory?Q.Assume that a commercial real estate whose monthly rent is TRY6,000 is to be sold at TRY4,000,000. Inflation rate has been 10% and the nominal interest rate 16% on the average for the last 15 years. The economy has grown at a real rate of 4% over the same period, so have rental revenues. If an investor has adaptive expectations, should he/she buy the real estate or not? Explain why.
- 1. A. Harold Hotelling forecast that someday the oil industry would come to an end. For the interim period, in between his time and the end of oil, what were Hotelling's expectations for (i) consumers, (ii) oil production investors, and (iii) oil prices? B. Marion King Hubbard forecast that the oil industry would continue to expand, and then shrink. What reasoning did Marion King Hubbert use to form his expectations? C. Contrary to the forecast of Harold Hotelling, today's global oil output is greater than ever. Nevertheless, what have top Middle East oil exporting nations do to apply Hotelling's expectations into their own national oil export policies? D. Also contrary to the beliefs of Marion King Hubbert, today's global oil output is greater than ever, rather than less. Even the USA's oil output is greater today than it was when Hubbert made his forecast. Nevertheless, what have the major oil exporters of the Arabian Gulf done in the past to apply Hubbert's forecasts into their…According to adaptive expectations, what happensto the inflation rate and the unemploymentrate in the following situations?a. Initially, the economy is operating at thenatural rate of 6 percent unemployment.The anticipated rate of inflation is6 percent, and the actual rate is also6 percent.b. In the next period, there is an unexpected risein the inflation rate to 10 percent.c. In the next period, there is an unexpected risein the inflation rate to 12 percent.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