Rational expectations implies
A) that consumers can be systematically fooled.
B) that the central bank always foresees what the fiscal authority will do.
C) that the consumers and firms in models do the best they can in forecasting future economic variables.
D) that in models with aggregate shocks, consumers and firms always correctly forecast inflation.
E) that models in which we make this assumption are always right.
Correct Answer:
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A)only in Europe.
B)only
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Q30: In the Basic New Keynesian model, if
Q31: When firms are subject to Calvo pricing
A)they
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A)unexpectedly
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A)unbelievable inflation.
B)uncharted inflation.
C)unrealized
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Q36: The Fisher relation states that
A)the real interest
Q37: An example of an arrangement that helps
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