Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 16, Problem 13QP
To determine
The rational expectation and its impact on the economic viability.
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The rational expectations assumption is unrealistic because, essentially, it amounts to the assumption that every consumer has perfect knowledge of the economy.” Discuss in the context of developing countries.
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Explain the term “Rational Expectations” as Thaler used in the first chapter of Misbehaving.
Chapter 16 Solutions
Macroeconomics
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
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- If most people have rational expectations, how long will recession last ? Explain.arrow_forwardHow would the AD/AS model be different if it assumed rational expectations rather than adaptive expectations? Define and give an example of each.arrow_forwardWhy might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rule?arrow_forward
- Suppose wages and prices are flexible, people form their expectations rationally, and they anticipate policy incorrectly.What happens?arrow_forwardIs their possibility that money always neutral in a Neo-classical model of the macroeconomy?arrow_forwardThe Great Depression undermined the credibility of the classical view. Correspondingly, the high rates of inflation and unemployment during the 1970s undermined the Keynesian view. Can you explain why both of these phenomena occurred?arrow_forward
- Show how the Rational Expectations Model of the New Classical Economists proves the irrelevance of economic policy to ensure economic stability.arrow_forwardAccording to the rational-expectations approach, if everyone believes that policymakers are committed to reducing inflation, the cost of reducing inflation—the sacrifice ratio—will be lower than if the public is skeptical about the policymakers’ intentions. Why might this be true? How might credibility be achieved?arrow_forwardAccording to the rational-expectations approach, if everyone believes that policymakers are committed to reducing inflation, the cost of reducing inflation—the sacrifice ratio—will be lower than if the public is skeptical about the policymakers’ intentions.Why might this be true? How might credibility be achieved?arrow_forward
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