Economists have focused more attention on the formation of expectations in recent years. This increase in interest can probably best be explained by the recognition that
A)expectations influence the behavior of participants in the economy and thus have a major impact on economic activity.
B)expectations influence only a few individuals,have little impact on the overall economy,but can have important effects on a few markets.
C)expectations influence many individuals,have little impact on the overall economy,but can have distributional effects.
D)models that ignore expectations have little predictive power,even in the short run.

Question

Quizplus · Accepted Answer

Economists have recognized that expectations have a significant impact on economic activity because they influence the behavior of individuals in the economy. Thus, it is essential to understand how expectations are formed and how they affect economic outcomes if one wants to make accurate predictions about the future state of the economy.

Economists Have Focused More Attention on the Formation of Expectations