According to the adaptive expectations hypothesis,

Question

Quizplus · Accepted Answer

The adaptive expectations hypothesis suggests that people base their expectations about the future rate of inflation on the actual rates of inflation experienced in the recent past. So, option C is correct. Option A is incorrect as the hypothesis relates specifically to inflation expectations and not income expectations, option B is incorrect as it does not relate to the hypothesis, and option D is also incorrect as it does not relate specifically to inflation expectations.

According to the Adaptive Expectations Hypothesis