Adaptive expectations assumes that individuals a) can accurately predict the future. b) base predictions on random events (i. e., animal spirits). c) form their predictions of macroeconomic variables randomly. d) use all available information in predicting the future. e) none of the above

The answer is: E. None of the above.

Explanation:

Adpative expectations is a theory commonly used in economic studies. It states that people try to predict the future based on past events. For example, they will try to predict next year's inflation rate based on the rate it increased last year. According to this theory, their predictions are not based on random events or random macroeconomic variables, not even in other existing information.

This theory has been discussed by many other economists, it has been said that it is too simplistic and that people, in fact, can take into account many other factors and form rational expectations of the future, therefore, human behavior in the real world, cannot be explained only in terms of adaptive expectations that people form of the future.

question - in 1827, john walker, a druggist in a small english town, tipped a splint with sulphur, chlorate of potash, and sulphid of antimony, and rubbed it on sandpaper, and it burst into flame. the druggist had discovered the first friction-chemical match, the kind we use to-day. it is called friction-chemical because it is made by mixing certain chemicals together and rubbing them. although walker's match did not require the bottle of acid, nevertheless it was not a good one. it could be lighted only by hard rubbing, and it sputtered and threw fire in all directions. in a few years, however, phosphorus was substituted on the tip for antimony, and the change worked wonders. the match could now be lighted with very little rubbing, and it was no longer necessary to have sandpaper upon which to rub it. it would ignite when rubbed on any dry surface, and there was no longer any sputtering. this was the phosphorus match, the match with which we are so familiar. according the paragraph what was the benefit of the new phosphorus match? it burst into flame when rubbed on sandpaper. it was made by mixing chemicals. it could be ignited on any dry surface. it threw fire in all directions.

answer - matches required natural chemicals