Question

Question 39 The theory of rational expectations holds that Select the correct answer below: people form the most accurate possible expectations about the future they can, using all information available to them. people rationally expect recessions to persist people adapt their expectations based on the past people do not trust their expectations Question 1 Use the aggregate supply (AS) curve and aggregate demand (AD) curve below to determine the equilibrium price level and equilibrium real G DP for this economy. 240 AD AS 200 160 120 80 40 20 40 60 80 100 120 140 160 180 Real GDP (in billions) Aggregate demand and aggregate supply with an intersection at real gdp equal to 100 billion and price level equal to 100 Provide your answer below: $$Price Level 160, Real GDP=$100 billion Question 2 The data below represents the price level, the aggregate demand, and the aggregate supply data for an economy. Use the data points to plot an aggregate demand curve and aggregate supply curve for this economy Each curve is labeled as AS (Aggregate Supply) or AD (Aggregate Demand) and each point is labeled as a, b, or c from the table headings. b a 20 60 100 Price Level Aggregate Supply (AS)$800 $1,000 $1,200 Aggregate Demand (AD) $1,400 $1,000 $600 Price Level

Answer 1

39. Rational expectation theory holds that people form the most accurate possible expectations about the future they can, on the basis of all information available to them.

Answer: Option A

1. Equilibrium occurs at the point where AD and AS curves intersect. So, the equilibrium price level is 160 and the equilibrium real GDP is $100 billion.