When people form expectations about future inflation based on last period's inflation rate, it is said that expectations are formed:
A) analytically.
B) using the rule of Law.
C) using a rule of thumb.
D) rationally.

Question

Quizplus · Accepted Answer

Expectations formed based on last period's inflation rate without any rigorous analysis or calculation is known as a rule of thumb. It is a common heuristic or mental shortcut used to make predictions about future inflation rates. This approach may not always be accurate or rational, as it does not take into account other relevant economic factors that could affect inflation.

When People Form Expectations About Future Inflation Based on Last