1 

Rational expectations theories were developed as a response to theories which were based on adaptive expectations. Under adaptive expectations, the future expectations of an economic variable are based on historic/past values. For example, in this scenario individuals would be assumed to predict inflation by looking at inflation of the  previous years.Basically under adaptive expectations, if the economy constantly has rising inflation rates (perhaps due to government policies), people would be assumed to always underestimate inflation. Many economists believe this to be unrealistic, as rational individuals would sooner or later realize the trend and take it into account.

Meanwhile rational expectations hypothesis has been used to support credible arguments and analysis about economic policymaking. An example is the policy ineffectiveness that was put out by Thomas Sargent and Neil Wallace. It basically stated that if the Federal Reserve tried to lower unemployment by means of expansionary monetary policy economic agents then the agents present will anticipate the effects of the change of policy and accordingly raise their expectations of future inflation. This in turn will acts in the opposite direction of  the expansionary effect of the increased money supply. The government can only hope to increase inflation rate and not employment. The Lucas critique in the 1970s seemed to be the culmination of Rational Expectations model.. But still rational expectations theory has been widely adopted and is considered a vague assumption in macroeconomic framework.

2 

Monetary policy deals with the change in money supply of an economy. The Central Bank of a country decides whether to increase or decrease the money supply in accordance with the necessary policy changes ongoing in an economy. It is actually good for a country to have an independent Central Bank because in that case there are no governmental pressure to do according to the ruling party and rather focus on which policies would genuinely be good for the nation. There are various instances where the chief of these Central Banks have resigned over disagreements with the ruling party because their ability to take proper monetary decisions was questioned by the government. However, at the same time, there might be some unpleasant consequences of a completely independent Central Bank where the government is not kept on the loop.

Therefore, for a successful monetary policy, the independence of the Central Bank is a must along with minimum interference from the government so that it can function without being held accountable to handle problems which are not under its jurisdiction. The government should realise that the Central Bank is a financial institution and not a political one.

3 

Ome of the personality traits of entrepreneurs are:

1. Rsik loving - risk averse entrepreneurs rarely succeed as more the risk, more the profits one gains.
2. need and greed for achievement
3. self-efficacy/proactivity - procrastination cannot hellp entrepreneurs specially at a time when there are several competitors in the same line.
4. innovativeness - Innovation is the key for every business to outshine others.
5. stress/uncertainty tolerance - there is always uncertainty prevailing in business and a lot is on stake for entrepreneurs.
6. and need for autonomy - no business can prevail in too much regulations.

The above personality traits are given after research done by Harvard business School on the Big 5 model which is a multidimensional approach towards defining personality by  measuring factors such as openness, conscientiousness and agreeableness.

4 

1. Currency appreciation is an increase in the value of one currency in relation to another currency. Example if for $1 yesterday you bought goods worth 120 yen yesterday and today for the same $1 you can buy goods worth 122 yen today, US dollar has appreciated. Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies. Example, in the same example I mentioned above, yen depreciated against dollar as now for the same $1, 122 yen worth of goods will have to be exchanged when yesterday 120 yen worth goood had to be exchanged.

2. In 2007, US dollar depreciated by 36.8% while Japanese yen appreciated 58.4%

in 2011, US dollar appreciated by 57% and japanese yen depreciated by 36%

The formula I used is Percent Change=(V1−V2)|V2|×100 where V1 is the starting rate and V2 is the final rate given that you choose base currency to be dollars.