Expected inflation is:
A) equal to zero.
B) equal to the real interest rate.
C) equal to future periods' inflation rates.
D) the rate of inflation that firms believe will prevail in macroeconomy.
E) about 2 percent.

Question

Quizplus · Accepted Answer

Expected inflation is the rate of inflation that firms and individuals believe will prevail in the economy in the future, based on their assessment of economic conditions and policy. Option D states that it is the rate of inflation that firms believe will prevail in the macroeconomy. Hence, it is the correct answer. Options A, B, C, and E are incorrect.

Expected Inflation Is