Rational Expectations in the Economy and Unemployment

Instructions:

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

question 1 of 3

How does the theory of rational expectations relate future economic outcomes to the behavior of those making market decisions?

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1. How can the rational expectations theory be applied to the labor market and the government's role in employment levels?

2. Jim owns a custom printing business. According to the theory of rational expectations, how would he reach a decision about whether to expand his business in the next year?

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About This Quiz & Worksheet

The quiz will explore your understanding of the definitions related to rational expectations. Most questions will ask you to understand the characteristics of the theory. Other questions will provide you with a term and you will then need to identify the correct definition.

Quiz & Worksheet Goals

The quiz covers the following topics:

  • The theory of rational expectations
  • New classical economics
  • Predictions made by the theory of rational expectations

Skills Practiced

The quiz helps you practice the following skills:

  • Reading comprehension - ensure that you draw the most important information from the related economics lesson
  • Making connections - use understanding of the concept of the theory of rational expectations
  • Knowledge application - use your knowledge to identify the beliefs of new classical economists

Additional Learning

Finish the quiz and head over to the related lesson titled Rational Expectations in the Economy and Unemployment. The lesson covers the following objectives:

  • Define rational expectations theory
  • Explore the characteristics of rational expectations theory
  • Explain the New Classical School of Economics
  • Understand the predictions of the rational expectations theory
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