If inflation is 3 percent last year and 2 percent this year an individual who follows extrapolative expectations, what is the inflation rate that the individual is likely to for the coming year?
A)0 percent
B)1 percent
C)3 percent.
D)5 percent.

Question

Quizplus · Accepted Answer

Extrapolative expectations involve predicting future values based on past trends. Since inflation decreased from 3% to 2%, the individual might expect a further decrease, possibly predicting 1% for the coming year.

If Inflation Is 3 Percent Last Year and 2 Percent