Four possibilities have probabilities 0.4, 0.2, 0.2 and 0.2 and values $10, $20, $30, and $40 respectively. The expected value is:

In the permanent-income hypothesis incorporating rational expectations, the actual cyclical pattern of consumption in the United States is too ________ to justify the assumption that a current change in income ________

A) smooth, is a poor guide to future income changes B) volatile, is a poor guide to future income changes C) smooth, leads to a gradual change in permanent income D) volatile, leads to a gradual change in permanent income

Refer to Figure 12.4. Since the housing bubble burst and the economy returned to its initial, pre-bubble level before the corrective policy changed output, the impact of the change in policy is best represented as a movement from

A) point A to point B. B) point C to point D. C) point B to point D. D) point C to point B.