A rational expectation of the inflation rate is
A) an expected inflation rate between 1 per cent and 5 per cent.
B) always correct.
C) a forecast based on the forecasted actions of the Reserve Bank and other relevant determinant factors.
D) an expected inflation rate between 5 per cent and 10 per cent.
E) a forecast based only on the historical evolution of inflation over the last 100 years.

Question

Quizplus · Accepted Answer

Rational expectations of the inflation rate are forecasts that incorporate all available information, including the anticipated actions of the central bank (such as the Reserve Bank) and other factors that could influence inflation. This approach uses all relevant data and analyses to make an informed prediction, rather than relying on a specific historical period or assuming a fixed range of inflation rates.

A Rational Expectation of the Inflation Rate Is