, ECS4861 Assignment 1 (COMPLETE ANSWERS) Semester 1 2025 - DUE 8
May 2025;100% CORRECT AND TRUSTED SOLUTIONS [Q1 - Q50]
Question 1
Which of the following describes how people acquire information
according to the rational expectations hypothesis?
1. They ignore historic data because this is already reflected in prices.
2. They ignore publicly available information because this is already
reflected in prices.
3. They search for information up to the point where the expected
marginal cost of further information equals the expected marginal
value thereof.
4. Only new information is taken into account in decision-making.
Answer: 3
Explanation: Under rational expectations, people are assumed to gather
information until the cost of gathering more exceeds the benefit of the
extra accuracy.
Question 2
How do new classical models differ from orthodox monetarism?
1. New classical models assume rational rather than adaptive
expectations.
2. New classical models do not permit 'money illusion', even in the
short run.
3. In new classical models, systematic changes in monetary policy
have no effect on real output.
4. All the statements are correct.
Answer: 4
Explanation: All listed points are features of new classical models; they
contrast with monetarist ideas by assuming fully rational agents and
immediate market adjustments.
May 2025;100% CORRECT AND TRUSTED SOLUTIONS [Q1 - Q50]
Question 1
Which of the following describes how people acquire information
according to the rational expectations hypothesis?
1. They ignore historic data because this is already reflected in prices.
2. They ignore publicly available information because this is already
reflected in prices.
3. They search for information up to the point where the expected
marginal cost of further information equals the expected marginal
value thereof.
4. Only new information is taken into account in decision-making.
Answer: 3
Explanation: Under rational expectations, people are assumed to gather
information until the cost of gathering more exceeds the benefit of the
extra accuracy.
Question 2
How do new classical models differ from orthodox monetarism?
1. New classical models assume rational rather than adaptive
expectations.
2. New classical models do not permit 'money illusion', even in the
short run.
3. In new classical models, systematic changes in monetary policy
have no effect on real output.
4. All the statements are correct.
Answer: 4
Explanation: All listed points are features of new classical models; they
contrast with monetarist ideas by assuming fully rational agents and
immediate market adjustments.
