The rational expectations hypothesis assumes that individuals will
a. never make forecasting errors.
b. be as likely to overestimate as to underestimate the future rate of inflation.
c. continually make systematic forecasting errors.
d. ignore past forecasting errors when formulating predictions.
B
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As more producers with differing marginal rates of transformation are added, the joint production possibility curve becomes
A) steeper. B) flatter. C) more convex to the origin. D) smoother.
On account of a massive construction boom in a country, the demand for iron ore increases substantially. This causes iron ore prices to escalate. Producers increase iron ore mining considerably in the short run, in spite of knowing that this will adversely affect future availability of ore. Which of the following is most similar to the scenario described above?
a. Corn producers hoard their supplies in order to induce a price hike. b. Petroleum manufacturers increase extraction in response to sky-rocketing fuel prices. c. The government of a country makes aforestation mandatory for lumber firms. d. Impressive revenue generation induces the government of a country to impose additional fuel surcharge. e. To discourage smoking, the government of a country increases sales tax on cigarettes.