Rational expectations theory is based on the assumption that when individuals in the economy are forming expectations, they
A) use all available information.
B) use past evidence only.
C) consistently make the same errors.
D) pay no attention to past information.
A
Economics
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Suppose the economy is initially in long run equilibrium. Which of the following lead to an increase in price level and a decrease in real GDP in the short run?
A. decrease in health insurance premiums paid by firms raises the cost of employing labor B. increase in govt transfer payments C. increase in the cost of a key input like oil D. sharp fall in stock market prices
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Present the case for floating exchange rates
What will be an ideal response?
Economics