According to the rational expectations hypothesis:

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Question:
According to the rational expectations hypothesis:

1.People do not make mistakes in forecasting inflation

2.People make only small mistakes in forecasting inflation

3.People do not make random mistakes in forecasting inflation

4.People do not make avoidable mistakes in forecasting inflation

Posted Date:-2021-11-29 04:00:47

More MCQS Questions and answers

  1. By taking out insurance cover an individual:
  2. 'Accrued interest' is:
  3. 'Reinsurance' refers to the practice by insurance companies of:
  4. A 'pay as you go' pension system is unsuitable for a private firm because:
  5. A 'Pay-As-You-Go' pension is one in which:
  6. A 'positive term premium' means:
  7. A bank with cash of 5, deposits at the central bank of 3, investments of 20, advances of 22 and customer deposits of 50 has a reserve ratio of:
  8. A bank's risk:asset ratio compares its capital with its:
  9. A belief that expectations were exogenous could lead one to the view that judgements about the future were likely to be based on:
  10. A bond issued in July 1997 will mature in July 2013 for £100. In July 2003, its original maturity and residual maturity would be (respectively):
  11. A central bank which sets the short-term rate of interest must:
  12. A central bank wishes to indicate that its official interest rate will be 4.5% from tomorrow. What repurchase price should it set for 28 day repo deals in government bonds valued at £1m?
  13. A company has just declared a dividend of 8p per share on shares current valued at £1.50. Dividends have been growing steadily at 5 per cent p.a. The dividend yield on these shares is is:
  14. A corporate bond paying an annual coupon of £9 matures for £100 on 30 September 2011. What is its price on 1 October 2008 if interest rates are 8.5 per cent?
  15. A downward sloping yield curve most likely indicates:
  16. A firm announces that its next dividend payment will be 12p per share. The shares are currently priced at £1. The firm's earnings have recently grown at a rate of 9 per cent per year and this is expected to continue. The total annual return on these shares is:
  17. A government sale of treasury bills to the central bank is the nearest thing in a modern economy to:
  18. A mutual fund manager shifts part of his portfolio from long-dated bonds to money market instruments even though yields are unchanged. Most likely he is expecting:
  19. A retirement annuity is particularly attractive to someone who has:
  20. A share with a β-coefficient of 0.9 has a rate of return of 16%, when the whole market return is 17%. What return should it produce if the risk free rate rises from 7% to 8%, ceteris paribus.
  21. A sudden demand by depositors for notes and coin is an example of:
  22. A treasury bill which matures in 62 days for £250,000 is currently trading at 248,000. The rate of discount on this bill is:
  23. A unit trust fund is established with assets of £200m divided into 150m units. The value of the underlying assets rises to £250m. The value of each unit is:
  24. According to the Fisher hypothesis, the nominal rate of interest consists of:
  25. According to the liquidity preference theory of interest, an increase in uncertainty, other things being equal, will:
  26. According to the policy irrelevance theorem, why is policy irrelevant?
  27. According to the rational expectations hypothesis:
  28. All demand for money functions that are tested are macroeconomic relationships between the aggregate demand for money and other economic variables because:
  29. An 'open-end' investment fund is one which:
  30. An 'overdraft' economy is one in which:
  31. An airline expands its fleet of planes just before a serious accident reduces the demand for its flights. This is an example of:
  32. An asset began the year with a price of £2.50. It paid income of 30p and finished the year at a price of £2.75. Over the year its rate of return was:
  33. An increase in (i) the price level and (ii) the rate of inflation:
  34. As the level of interest rates in the economy falls, the demand for money, ceteris paribus:
  35. Asset A has a variance of 25 while asset B has a variance of 9. The covariance of returns is -15. The proportion of a two asset portfolio that would have to be invested in A in order to create a perfectly riskless portfolio is:
  36. Assume that a central bank is willing to buy 14 day repos for $1m, with a repurchase price of $1,002,000. What rate of interest is the central bank charging?
  37. Assume that the central bank's main responsibility is to minimise the rate of inflation. A release of economic data suggests that inflationary pressure is increasing. In the circumstances the yield curve is likely to:
  38. Bank deposit insurance was set up:
  39. Because their flows of funds are largely contractual, life assurance companies can hold:
  40. Corporate bonds have higher yields than government bonds because:
  41. Diversification is one way in which insurance companies can protect themselves against:
  42. Five assets have expected mean returns and variances as follows: (A) 8% 15; (B) 12% 18; (C) 11% 18; (D) 15% 20; (E) 11% 17. Which of these assets will be rejected by all rational risk-averse investors?
  43. Given a current rate of inflation of 3 per cent, and an expected rate of inflation next year of 5 per cent, what increase in nominal wages will workers seek in order to increase their real wage by 2 per cent:
  44. Given a fall in interest rates, the largest price change will occur in:
  45. Government appointed members of the Monetary Policy Committee of the Bank of England are appointed:
  46. If a firm has one million shares in issue, earns profits of £200,000 and operates a retention ratio of 0.4, the dividend per share will be:
  47. If asset A has a variance of 49 while asset B has a variance of 36 while the correlation coefficient of their returns is 0.75, the covariance of the returns of the two assets is:
  48. If interest rates rise, the present value of any future earnings is bound to:
  49. If investors become income risk averse, they will:
  50. If long-term interest rates rise from 5 per cent to 6 per cent, the price of a perpetual UK government bond with a 7 per cent coupon will change by:
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