Suppose the inflation rate has risen 0.5 percent a year for the past three years.Using this experience an individual forecasts a 0.5 percent rise in the coming year's inflation rate.This is an example of:
A)traditional expectations.
B)rational expectations.
C)adaptive expectations.
D)reflective expectations.
E)deductive expectations.

Question

Quizplus · Accepted Answer

This is an example of adaptive expectations, where an individual forms their expectation of future inflation based on past experience. This approach assumes that future inflation rates will be similar to past rates, regardless of changes in economic conditions or policies. The other options, such as rational expectations, which assumes individuals use all available information to form expectations, are not supported by the given scenario.

Suppose the Inflation Rate Has Risen 0