The application of rational expectations to the permanent-income hypothesis implies that information contained in
A) only past income levels will determine permanent income.
B) only past income levels will determine transitory income.
C) only new changes in income that are unanticipated can change permanent income.
D) only new changes in income that are anticipated can change permanent income.
C
Economics
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When output is below potential and the policy rate has hit the floor of zero, if policymakers do nothing, output will ________ and inflation will ________
A) rise; fall B) fall; fall C) fall; rise D) rise; rise
Economics
When people use recent information to gradually adjust their forecasts of inflation, they are said to have:
A. static expectations. B. adaptive expectations. C. rational expectations. D. spiraling expectations.
Economics