Rational expectations involve the assumption that
A) market participants make use only of information on the past performance of an asset in determining what they believe its price should be.
B) market participants rarely change their minds about the correct price of an asset.
C) financial markets are good at increasing liquidity, but poor at transmitting information.
D) market participants makes use of all available information.
D
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Financial panics characterized by depositor "runs" and consequent bank failures have not occurred in the United States since the 1930s primarily because
A) commercial banks now hold larger reserves. B) the Federal Deposit Insurance Corporation has reduced the fears of depositors. C) we have abandoned the gold standard. D) we have had no major recessions since the 1930s.
Governments often ________ activities that generate external ________.
A. tax; benefits B. simultaneously tax and subsidize; costs C. tax; costs D. subsidize; costs