--%>
Assignment Help - homework help

Adaptive expectations & Rational expectations

Question:

Compare and contrast 'adaptive expectations' (Hubbard uses adaptive expectations)  and 'rational expectations' in modeling expectations.

Answer:

Adaptive expectations theory assumes that people expect the inflation rate next year to be equal to the inflation rate last year. The rational expectation hypothesis, on the other hand, assumes that economic agents use all the available information to make an expectation about the next year's inflation rate. So the rational expectation approach make the inflation expectation to be more information based and not merely by observing the last year's inflation and expect it to persist next year.

 

   Related Questions in Macroeconomics

  • Q : Balance the budget general approaches

    Quetion: Explain why there are long-term Federal government budget problems.   Explain why the base-line forecast of the CBO is misleading.   Include in your answer why solutions to the problem

    		•
  • Q : Conditions through which the supply

    What are the conditions through which the supply curve will shift?

    		•
  • Q : From where Washington bureaucrats

    Can someone please help me in finding out the accurate answer from the following question. Typical Washington bureaucrats derive the maximum consumer surplus from: (1) Publicity in the Senate hearings. (2) Consuming the water. (3) Writing complex regulation. (4) Eatin

    		•
  • Q : Macro economics policy (a) Do you think

    (a) Do you think that macroeconomic policy should be designed to achieve a measured unemployment rate of zero? Why or why not should this be the case?

    		•
  • Q : The failure of the Supercommittee

    Question: Some commentators have argued that the failure of the "Supercommittee" is good thing for the economy?  Do you argree? Answer:

    Q : Threats of SWOT analysis Threats of

    Threats of SWOT analysis: • Possible threat from other banks and other financial institutions • There is always a possible threat of market fluctuations. By this we me

    		•
  • Q : Calculating Trade balance Suppose the

    Suppose the value of exports of goods of a country is Rs. 1,000 crores and the value of imports of goods is Rs. 1,200 crores, what will be the trade balance (or balance of trade)?

    		•
  • Q : GDP gap "The economic cost of

    "The economic cost of unemployment is measured by the GDP gap." Explain this statement. ?

    		•
  • Q : Which things are concerned with

    Macroeconomics is mainly concerned along with all things as the: (i) decisions individuals and firms make while prices change. (ii) resource usage and technology bases of firms. (iii) levels of national employment and income. (iv) movements within the

    		•
  • Q : Fiscal measures to accurate

    Describe the fiscal measures to accurate the condition of deficient demand and excess demand. Answer: Fiscal measures are the government’s budgetary policy th

    		•