4. Study Questions and Problems #4 Suppose you flipped an honest coin 10 times and tails came up 4 times. You are about to toss the coin another 10 times. Complete the statements that follow to indicate how many tails you would expect in the next 10 coin flips based on adaptive expectations theory and rational expectations theory. Using adaptive expectations, you would expect tails to come up. Using rational expectations, you would expect tails to come up.
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- Do rational expectations tend to look back at past experience while adaptive expectations look ahead to the future? Explain your answer.3. What is a significant difference between rational and adaptive expectations? A. Rational expectations rely solely on historical data. B. Adaptive expectations adjust predictions based on new information. C. Rational expectations incorporate all available information, including new data. D. Adaptive expectations are always more accurate than d rational expectations. 9) Which asset demand function is legit? a) 4" = 2R² + σ - 31 + 2w b) 4" = 2R - 20 +31 + 2w c d ) A = 2R-σ +31-2w d) 4" = -2R +σ +3i + 2wConsumers expectations do not effect demand.Select one:a. Falseb. True
- The rational expectations theory assumes that a. market participants formulate their expectations solely on the basis of past information b. market participants formulate their expectations on the basis of past, present, and projected future information. C. market participants lack rational economic behavior. market participants have perfect foresight. d. e. market participants are slow to learn of new policies.Rational vs Adaptive Expectations. How are they both different from the assumption we have used up to this point? What are the policy implications of one versus the other?difference between rational expectations and adaptive expectations?
- 3. Explain how a rise in Government expending affects:3.1. The Phillips curve in the short run? How do you think are employers and employees going to react to this policy under adaptive expectations? 3.2. If the demand policy continues to apply how this is going to affect the Philips curve in the long run? 3.3. What about if the agents have rational expectations, is this policy effective?Compare and contrastadaptive expectations and rationalexpectations.Define rational expectations and explain the two rational expectation theories of the business cycle?? Definition of rational expectation: ......... Rational expectations theories. ...... ......
- Which theory states that people make decisions based on information they've gathered? A. Life-cycle theory B. Theory of rational expectations C. Keynesian theory D. Theory of adaptive expectationsSuppose you flipped an honest coin ten times and heads came up eight times. You are about to toss the coin another ten times. Using adaptive expectations, how many heads do you expect? Based on rational expectations, how many heads do you expect?Suppose you flipped an honest coin 10 times and tails came up 10 times. You are about to toss the coin another 10 times. Complete the statements that follow to indicate how many tails you would expect in the next 10 coin flips based on adaptive expectations theory and rational expectations theory. Using adaptive expectations, you would expect tails to come up. Using rational expectations, you would expect tails to come up.