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The Adaptive Expectations Hypothesis

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

Which of the following hypotheses relies upon past activity to predict future outcomes?

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1. What is the adaptive expectations hypothesis primarily concerned with?

2. How can an extreme change in prices and the purchasing power of customers affect investor's use of the adaptive expectation hypothesis?

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About This Quiz & Worksheet

Use this quiz and worksheet to assess your knowledge of the adaptive expectations hypothesis. In these assessments, you will define the method, identify why it is used and apply it to a real-world situation.

Quiz & Worksheet Goals

Objectives of these assessment tools include:

  • Define the adaptive expectations hypothesis
  • Understand financial information the hypothesis primarily concerns
  • Recognize the ways extreme change in prices and customer purchase power affect the use of the hypothesis
  • Understand which expectation uses past and current activities to predict future outcomes
  • Identify a situation where you would use the hypothesis

Skills Practiced

Students will practice comprehension skills, including:

  • Reading comprehension - ensure that you draw the most important information from the related finance lesson
  • Information recall - access the knowledge you've gained regarding the adaptive expectations hypothesis
  • Knowledge application - use your knowledge to answer questions about how the hypothesis is useful in real-life situations

Additional Learning

More information about the adaptive expectation hypothesis is available in the accompanying lesson called The Adaptive Expectation Hypothesis. Lesson objectives include:

  • Recall the definition of the hypothesis
  • Understand the relationship between prices and purchasing power
  • Compare and contrast adaptive expectations and rational expectations
  • View examples of applying the adaptive expectation hypothesis
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