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

Question

Quizplus · Accepted Answer

Rational expectations of inflation are often influenced by forecasts of monetary policy, as central banks like the Reserve Bank play a crucial role in controlling inflation through interest rates and other monetary tools.

A Major Factor in Determining the Rational Expectation of Inflation