Assume that prices have risen in a given economy by an average of 5 percent over the last nine years.If consumers base their expectations about future price movements on that knowledge alone their forecasts rely on ________.
A)reverse expectations
B)adaptive expectations
C)rational expectations
D)monetary expectations

Question

Quizplus · Accepted Answer

If consumers base their expectations solely on past information and assume that prices will continue to rise at the same rate, they have adaptive expectations. This approach assumes that past experiences are a valid guide for future expectations.

Assume That Prices Have Risen in a Given Economy by an Average