Compare the following three ways to model expectations: animal spirits, adaptive expectations, and rational expectations
What will be an ideal response?
Animal spirits assumed that expectations were simply random. Adaptive expectations assumed that individuals formed expectations by looking at past changes in a variable. Rational expectations assumed that individuals form expectations by using all currently available information and an understanding of the model and policy.
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If the nominal money supply doubles while real money demand is unchanged, what happens to the price level?
A) The price level increases by a factor of four. B) The price level doubles. C) The price level is unchanged. D) The price level falls by one-half.
People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would
like. This is an example of a: A. negative externality. B. supply-side market failure. C. demand-side market failure. D. government failure.