A rational expectation of the inflation rate is
A) a forecast based on the forecasted actions of the Fed and other relevant determinant factors.
B) an expected inflation rate between 1 percent and 5 percent.
C) a forecast based only on the historical evolution of inflation over the last 100 years.
D) an expected inflation rate between 5 percent and 10 percent.
E) always correct.

Question

Quizplus · Accepted Answer

A rational expectation of the inflation rate is a forecast based on the expected actions of the Fed and other relevant determinant factors. It is not based solely on historical inflation rates, and it may not always be correct. The expected inflation rate may fall within a range, but it is not necessarily limited to a specific percentage range.

A Rational Expectation of the Inflation Rate Is