A major factor in determining the rational expectation of inflation is
A) forecasts of fiscal policy.
B) forecasts of the Fed's monetary policy.
C) the previous month's unemployment rate.
D) the recent past behavior of the stock market.
E) the size of the budget deficit.

Question

Quizplus · Accepted Answer

Forecasts of the Fed's monetary policy is a major factor in determining the rational expectation of inflation, as the Fed plays a crucial role in controlling inflation through its monetary policy decisions. Other factors such as fiscal policy, unemployment rate, stock market behavior, or budget deficit can also affect inflation, but they are not as directly linked or influential as the Fed's monetary policy.

A Major Factor in Determining the Rational Expectation of Inflation