Economics homework help. Expectations.
Title of the essay :
- Why are expectations important for macroeconomics? Discuss the use of rational expectations and adaptive expectations in macroeconomic models .
1500 words you have to add graph where needed to explain it better
Introduction (100 words )
- What is macroeconomic
- What are the expectations of macroeconomic
- What is rational expectation
- What is adaptive expectations
- The roles for expectations :
- Income
- Wealth
- Investment,
- Government
- central bank policy
In the introduction you explain the main point that the essay will look at .
Main body
- What is macroeconomic
- Risk uncertainty and expectation
- Critically Explain all the roles of expectation :
income, wealth, investment, government and central bank policy.
- There are a wide range of economic issues that are determined by expectations
- Business investment is determined by expectations about the economic outlook.
- Pricing behaviour depends on expected demand and costs.
- Valuation of securities is based on expected future income.
- Saving and spending decisions can be influenced by the likelihood of unemployment.
- Compare in few sentences how Behavioural Finance treats long-term expectations in the financial markets with the views expressed by Keynes
- What are the types of expectations of macroeconomic
- What is rational expectation :it Uses economic model to forecast future periods
- Muth 1961 theory
- Controversial theory as it suggest markets will move naturally forwards equilibrium
- What is adaptive expectations
- Expect inflation to be same as last period
- Give a theory that explain it
- Phillips curve, expectation and inflation explain with graph if needed
- The three equation models may be presented in full and the steps back to equilibrium will be fully explained.
- Comparison of adaptive and rational inflation expectation
- Central bank communication and anchoring inflation expectation
- The lucas critique
- Expectation hypothesis , inflation basis,and time inconsistency
