Rational expectations are more accurate than adaptive expectations, ________
A) on average
B) always
C) because they require less information
D) except when policies have changed
A
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In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if the interest rate rises?
A) There is a movement to a point such as b on supply of loanable funds curve SLF0. B) The supply of loanable funds curve shifts rightward to a curve such as SLF2. C) The supply of loanable funds curve shifts leftward to a curve such as SLF1. D) none of the above
James took out a fixed-interest-rate loan when the CPI was 200 . He expected the CPI to increase to 206 but it actually increased to 204 . The real interest rate he paid is
a. higher than he had expected, and the real value of the loan is higher than he had expected. b. higher than he had expected, and the real value of the loan is lower than he had expected. c. lower than he had expected, and the real value of the loan is higher than he had expected. d. lower then he had expected, and the real value of the loan is lower than he had expected.