A major factor in determining the rational expectation of inflation is
A)forecasts of fiscal policy.
B)the size of the budget deficit.
C)the recent past behavior of the stock market.
D)the previous month's unemployment rate.
E)forecasts of the Fed's monetary policy.

Question

Quizplus · Accepted Answer

Rational expectations of inflation are largely influenced by forecasts of the Fed's monetary policy, as the central bank's actions directly impact interest rates and inflation expectations.

A Major Factor in Determining the Rational Expectation of Inflation