ECS4861
Assignment 1 2025
Unique number:
Due Date: 8 May 2025
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Helpful answers and guidelines
Detailed explanations and/ or calculations
References
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, 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.
Explanation: According to the rational expectations hypothesis, people gather
information until the cost of collecting more exceeds the benefit they expect to
gain from it.
Question 2
How do new classical models differ from orthodox monetarism?
a. New classical models assume rational rather than adaptive
expectations.
b. New classical models do not permit 'money illusion', even in the
short run.
© Study Shack 2025. All rights Reserved +27 68 812 0934
Assignment 1 2025
Unique number:
Due Date: 8 May 2025
This document includes:
Helpful answers and guidelines
Detailed explanations and/ or calculations
References
Connect with the tutor on
+27 68 812 0934
,© Study Shack 2025. All rights Reserved +27 68 812 0934
, 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.
Explanation: According to the rational expectations hypothesis, people gather
information until the cost of collecting more exceeds the benefit they expect to
gain from it.
Question 2
How do new classical models differ from orthodox monetarism?
a. New classical models assume rational rather than adaptive
expectations.
b. New classical models do not permit 'money illusion', even in the
short run.
© Study Shack 2025. All rights Reserved +27 68 812 0934
