If market participants notice that a variable behaves differently now than in the past, then, according to rational expectations theory, we can expect market participants to
A) change the way they form expectations about future values of the variable.
B) begin to make systematic mistakes.
C) no longer pay close attention to movements in this variable.
D) give up trying to forecast this variable.
A
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Refer to Table 3-5. The table contains information about the corn market. Use the table to answer the following questions
a. What are the equilibrium price and quantity of corn? b. Suppose the prevailing price is $9 per bushel. Is there a shortage or a surplus in the market? c. What is the quantity of the shortage or surplus? d. How many bushels will be sold if the market price is $9 per bushel? e. If the market price is $9 per bushel, what must happen to restore equilibrium in the market? f. At what price will suppliers be able to sell 24,000 bushels of corn? g. Suppose the market price is $21 per bushel. Is there a shortage or a surplus in the market? h. What is the quantity of the shortage or surplus? i. How many bushels will be sold if the market price is $21 per bushel? j. If the market price is $21 per bushel, what must happen to restore equilibrium in the market?
There is a 50 percent decrease in the price of lumber used by a firm that builds new homes. This causes
A) a decrease in the quantity of new homes supplied. B) an increase in the supply of new homes. C) an increase of the quantity supplied of new homes. D) a decrease in the supply of new homes.