If expectations of the future inflation rate are formed solely on the basis of a weighted average of past inflation rates,then economics would say that expectation formation is
A) irrational.
B) rational.
C) adaptive.
D) reasonable.

Question

Quizplus · Accepted Answer

Expectation formation based on a weighted average of past inflation rates can be considered as adaptive expectation formation. This is because individuals are basing their expectations on past experiences and are adapting their beliefs accordingly. While not necessarily the most accurate way of determining future inflation rates, it is a rational and reasonable approach to expectation formation.

If Expectations of the Future Inflation Rate Are Formed Solely