When market participants have rational expectations, A. they are able to forecast interest rates more accurately...
When market participants have rational expectations,
A.
they are able to forecast interest rates more accurately than inflation rates.
B.
they are less likely to make accurate forecasts than if they have adaptive expectations.
C.
they use all information available to them.
D.
they only slowly adjust their expectations to news which could affect prices or returns.
Homework Answers
When market participants have rational expectations, then they make choice based on past data and all other available information. Since people are using all the available information, therefore, forecasts are correct on the average. Also, they adjust their expectations to new news quickly.
Thus the option (C) is correct.
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7-is/ is not
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14-diversifiable/non diversifiable
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