According to the adaptive expectations hypothesis, people will
A) anticipate that what has happened in the immediate past will continue.
B) systematically overestimate inflation when inflation is increasing.
C) use all available information, including information on the expected impact of economic policy, when they formulate expectations about economic events.
D) systematically underestimate inflation when inflation is declining.

Question

Quizplus · Accepted Answer

The adaptive expectations hypothesis suggests that people will anticipate that what has happened in the immediate past will continue, meaning they will use past information to form expectations about future economic events.

According to the Adaptive Expectations Hypothesis, People Will