, ECS4861 Assignment 1 (COMPLETE ANSWERS) Semester
1 2025 - DUE 8 May 2025; 100% correct solutions and
explanations.
Question 1: Which of the following describes how people
acquire information according to the rational expectations
hypothesis?
a) They ignore historic data because this is already reflected in
prices.
b) They ignore publicly available information because this is
already reflected in prices.
c) They search for information up to the point where the
expected marginal cost of further information equals the
expected marginal value thereof.
d) Only new information is taken into account in decision-
making.
Answer:
c) They search for information up to the point where the
expected marginal cost of further information equals the
expected marginal value thereof.
Explanation:
The rational expectations hypothesis suggests that individuals
acquire information efficiently, seeking to balance the cost of
acquiring further information with the expected benefit of that
information.
Question 2: How do new classical models differ from orthodox
monetarism?
1 2025 - DUE 8 May 2025; 100% correct solutions and
explanations.
Question 1: Which of the following describes how people
acquire information according to the rational expectations
hypothesis?
a) They ignore historic data because this is already reflected in
prices.
b) They ignore publicly available information because this is
already reflected in prices.
c) They search for information up to the point where the
expected marginal cost of further information equals the
expected marginal value thereof.
d) Only new information is taken into account in decision-
making.
Answer:
c) They search for information up to the point where the
expected marginal cost of further information equals the
expected marginal value thereof.
Explanation:
The rational expectations hypothesis suggests that individuals
acquire information efficiently, seeking to balance the cost of
acquiring further information with the expected benefit of that
information.
Question 2: How do new classical models differ from orthodox
monetarism?
