Under adaptive expectations theory, people expect the rate of inflation this year to be:
A)zero, regardless of the rate last year.
B)the same as last year.
C)the rate based on predictable and fiscal policies.
D)All of these.

Question

Quizplus · Accepted Answer

Under adaptive expectations theory, people form their expectations of future inflation based on past inflation rates, typically expecting it to be the same as last year.

Under Adaptive Expectations Theory, People Expect the Rate of Inflation