Question

29) Rational expectations theory suggests that ________.

A) consumers base their expectations about the future largely on past experience.

B) economic agents will always alter their decision-making when a new piece of information becomes available.

C) economic agents will not be influenced by a piece of information if that information has already been anticipated.

D) consumers need not form expectations about the far flung future since most consumption decisions involve satisfying an immediate impulse, e.g. hunger.

30) The "rational expectations revolution" refers to a substantial change in the thinking of ________.

A) households and businesses

B) policy makers

C) macroeconomists

D) elected officials

31) Forecasts based on the extrapolation of observed trends and relationships are likely to be accurate, if ________.

A) changes in expectations are properly considered

B) policy actions are anticipated

C) economic behavior is guided by rational expectations

D) policy changes are understood to be permanent