If inflation was 3 percent last year and 2 percent this year, an individual who follows extrapolative expectations would predict that the inflation rate for the coming year would be:
A)0 percent.
B)1 percent.
C)3 percent.
D)5 percent.

Question

Quizplus · Accepted Answer

Extrapolative expectations involve predicting future values based on recent trends. Since inflation decreased from 3% to 2%, an individual might expect it to continue decreasing, predicting a 1% inflation rate for the coming year.

If Inflation Was 3 Percent Last Year and 2 Percent