Question: RATIONAL EXPECTATIONS-EMH. 130 points] Exercise 4). Answer the following questions: (i). Forecasters' predictions of inflation are notoriously inaccurate, so their expectations of inflation cannot be

RATIONAL EXPECTATIONS-EMH. 130 points] Exercise 4). Answer the following questions: (i).

RATIONAL EXPECTATIONS-EMH. 130 points] Exercise 4). Answer the following questions: (i). "Forecasters' predictions of inflation are notoriously inaccurate, so their expectations of inflation cannot be rational". Is this statement true, false, or uncertain? Explain your answer. (6pl /(ii). I read in the Wall Street Journal that the "smart money" on Wall Street expects stock prices to increase, should I follow that lead and buy stocks? (6pl: (iii). Do you believe that the Rational Expectations Theory is realistic? (6pl fiv). What are the differences between the capital market and the money market? [6p] (v). What is the important characteristic of an efficient market? [6p

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