________ holds that people's expectations of future inflation are based on their most recent experiences.
A) Rational expectations theory
B) The Phillips curve
C) Adaptive expectations theory
D) Stagflation theory
E) Monetary neutrality

Question

Quizplus · Accepted Answer

Adaptive expectations theory holds that people's expectations of future inflation are based on their most recent experiences. This means that if inflation has been high in the past, people expect it to continue to be high in the future, and vice versa. This theory contrasts with rational expectations theory, which assumes that people have access to all relevant information and use it to form expectations of future inflation.

________ Holds That People's Expectations of Future Inflation Are Based