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Home / Questions / Adaptive expectations and rational expectations differ only in the fact that adaptive expe

Adaptive expectations and rational expectations differ only in the fact that adaptive expe

Adaptive expectations and rational expectations differ only in the fact that adaptive expectations suggest agents are irrational.

 

 

112.If the inflation rate has been 6 percent over the past four years and the Federal Reserve announces an increase in the growth of the money supply, then adaptive expectations theory would predict an inflation rate of 6 percent.

 

 

113.The belief that people use all available past and current information to make economic decisions is the basis of the adaptive expectations theory.

 

 

114.In rational expectations theory, an expected increase in the money supply is represented by an upward movement along the vertical Phillips curve.

 

 

115.Political business-cycle theory asserts that political manipulation of the business cycle is an ineffective way to increase economic growth.

 

 

116.Oil price shocks, technological improvements, and expansionary fiscal policy are all examples of real business-cycle shocks.

 

 

117.A recessionary real shock is associated with an outward shift of the short-run Phillips curve and a leftward shift of the short-run aggregate supply curve.

 

 

118.The oil price shocks of the 1970s demonstrated that business-cycle fluctuations are not solely a function of discretionary government policy.

 

 

119.According to the government budget constraint, government spending is equal to the fiscal deficit plus the change in the money supply.

 

 

120.Because the growth in the money supply is unrelated to government spending, fiscal policy and monetary policy can be conducted independently.

Dec 16 2019 View more View Less

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