Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 26, Problem 1SCQ

Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.

Expert Solution & Answer

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Exotic Coffee for the Poor? What a Genius Idea! you are a business consultant at a coffee shop. Your team leader came to you one morning with excitement on her face and told you, "Guess what? I have an idea for a great location for our next coffee shop. Think about it, Riceville is a city that has 150,000 people. Most of them are above the age of 16, which means they are potential coffee drinkers. Well, even though the majority of people in that city are making minimum wage and are considered poor, but the good news is that there are no coffee shops in Riceville and the only places you could get coffee there either restaurants or gas stations. What do you think?" Knowing that your company’s average drink price is $5.50, and the stores have nice sit-down areas and offer free WIFI and study spaces: What type of information about consumers in that area do you need to gather and understand to determine if people there will actually consume your coffee? How do the concepts of “budget and…

(c) Assume an infinite horizon, continuous time and certainty. Furthermore, assume an additively separable utility function in consumption C and pollution stock S so that, U(C,S) = u(C) + v(S), where uc > 0; Ucc 0. Note that the first derivative, and the second subscript denotes the second derivative. The evolution of the pollution stock S over time is a function of consumption, decay rate of the stock of pollution & and abatement through the function, g(S) with gs > 0 and 9ss < 0. Time subscripts are ignored for ease of notation. Show that in the case of a stock pollutant, the marginal utility of consumption should equal the present value of disutility associated with the pollution stock. Interpret the condition.

Q3/for a closed loop system whose block diagram is shown in the figure determine the values of K and t such that the maximum overshoot to the unit step input is 25% and time to peak is 2 sec K 1+TS $2

Answer 2

Textbook Question

Chapter 26, Problem 1SCQ

Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.

Expert Solution & Answer

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 26, Problem 1SCQ

Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.

Expert Solution & Answer

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 26, Problem 1SCQ

Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.

Expert Solution & Answer

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Answer 8

Expert Solution & Answer

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Whether rational expectations look back at past experience while the adaptive expectations look ahead to the future is to be determined.

Answer 12

Explanation of Solution

The perspective of rational expectations supports that many people incorporate excellent information about the economic events and impact of the economy. This may lead to prompt price and other important economic adjustments. On the other hand, adaptive expectations theory worked on policy in which people have precise or limited information about economic information and other aspects with the impact of economy procedures. This may lead to a slow growth of price and other important economic adjustments.

As per the definition, rational expectations seek to predict the future as accurately as possible by using past experience as a departure point. While, adaptive expectations are largely backwards looking; that is, they adapt as experience accumulates, without attempting to look at future.

Therefore the statement is incorrect.

Answer 13

Economics Concept Introduction

Rational Expectation: According to the theory of rational expectations; people form the most accurate possible expectations about the future that they can, using all information available to them.

Adaptive Expectations: According to the theory of adaptive expectations; people look at past experience and gradually adapt their beliefs and behaviour as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future in the sense of rational expectations theory.

Answer 14

Ch. 26 - Do rational expectations tend to look back at past...Ch. 26 - Legislation proposes that the government should...Ch. 26 - Would it make sense to argue that rational...Ch. 26 - Summarize the Keynesian and Neoclassical models.Ch. 26 - Does neoclassical economics focus on the long term...Ch. 26 - Does neoclassical economics view prices and wages...Ch. 26 - What shape is the long-nm aggregate supply curve?...Ch. 26 - What is the difference between rational...Ch. 26 - A neoclassical economist and a Keynesian economist...Ch. 26 - Do neoclassical economists tend to focus more on...

Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.

Explanation of Solution

Want to see more full solutions like this?

Chapter 26 Solutions

Additional Business Textbook Solutions