Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 9QP
To determine
Evidence for rational and adaptive expectations.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
How can expectations about the future change what consumer buy now?
If most people have rational expectations, how long will recession last ? Explain.
If most people have rational expectations, how long will recessions last
Chapter 16 Solutions
Macroeconomics
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
Knowledge Booster
Similar questions
- Would it make sense to argue that rational expectations economics is an extreme version of neoclassicaleconomics? Explain.arrow_forwardExplain the term “Rational Expectations” as Thaler used in the first chapter of Misbehaving.arrow_forwardSuppose wages and prices are flexible, people form their expectations rationally, and they anticipate policy incorrectly.What happens?arrow_forward
- 1. A. Harold Hotelling forecast that someday the oil industry would come to an end. For the interim period, in between his time and the end of oil, what were Hotelling's expectations for (i) consumers, (ii) oil production investors, and (iii) oil prices? B. Marion King Hubbard forecast that the oil industry would continue to expand, and then shrink. What reasoning did Marion King Hubbert use to form his expectations? C. Contrary to the forecast of Harold Hotelling, today's global oil output is greater than ever. Nevertheless, what have top Middle East oil exporting nations do to apply Hotelling's expectations into their own national oil export policies? D. Also contrary to the beliefs of Marion King Hubbert, today's global oil output is greater than ever, rather than less. Even the USA's oil output is greater today than it was when Hubbert made his forecast. Nevertheless, what have the major oil exporters of the Arabian Gulf done in the past to apply Hubbert's forecasts into their…arrow_forwardRational vs Adaptive Expectations. How are they both different from the assumption we have used up to this point? What are the policy implications of one versus the other?arrow_forwardIn 2016, when the interest rate on 10-year German government bonds became negative, an article in the Wall Street Journal noted that the interest rate on 10-year bonds depended in part on investors' expectations of future short-term interest rates. The article also noted that "investors don't seem to have changed their perception of... [short-term] interest rates in the future." If the article is correct, can the expectations theory explain why the interest rate on 10-year German government bonds declined? Can the risk premium theory? Briefly explain.arrow_forward
- Rational expectations theory assumes Multiple Cholce consumer behavior is static. consumers will change their behavior, but it takes time. consumers will adjust to their current situation immediately consumers lack full information and would benefit from improved expectationsarrow_forwardAssume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers increases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the changearrow_forwardSuppose you flipped an honest coin 10 times and tails came up 10 times. You are about to toss the coin another 10 times. Complete the statements that follow to indicate how many tails you would expect in the next 10 coin flips based on adaptive expectations theory and rational expectations theory. Using adaptive expectations, you would expect tails to come up. Using rational expectations, you would expect tails to come up.arrow_forward
- The rational expectations assumption is unrealistic because, essentially, it amounts to the assumption that every consumer has perfect knowledge of the economy.” Discuss in the context of developing countries.arrow_forwardAssume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the changearrow_forwardAssume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change? Price D. Quantity Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. The equilibrium will be at point C before the change in expectations and point A after the a change The equilibrium will be at point A before the change in expectations and point B after the b change The equilibrium will be at point A before the change in expectations and point C after the change The equilibrium will be at point E before the change in expectations and point C after the d change [3 Fulls 40 laarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning