Adaptive expectations imply that firms:
A) adapt their prices to what the Fed does.
B) constantly update their inflation expectations.
C) slowly adjust their inflation expectations.
D) base prices on the rate of unemployment.
E) always know what the rate of inflation is.

Question

Quizplus · Accepted Answer

Adaptive expectations imply that firms and individuals adjust their expectations about the future based on past experiences and events. This process is often gradual, meaning they slowly update their inflation expectations rather than instantly or constantly.

Adaptive Expectations Imply That Firms