If expectations of the future inflation rate are formed solely on the basis of a weighted average of past inflation rates,then economists would say that expectation formation is
A)irrational.
B)rational.
C)adaptive.
D)reasonable.

Question

Quizplus · Accepted Answer

This type of expectation formation is called adaptive because it is based solely on past information and does not take into account any other factors or changes in the economy. It assumes that the future will be similar to the past and adjusts expectations accordingly. While not necessarily optimal, it is a common way for individuals to form expectations about the future.

If Expectations of the Future Inflation Rate Are Formed Solely