When people expect inflation, they assume that prices are going to increase at a certain rate and factor this into their decision making.

Question

Quizplus · Accepted Answer

When people expect inflation, they anticipate that prices of goods and services will increase in the future at a certain rate. As a result, they consider this expected rise in prices while making their decisions on spending, saving, and investing. This phenomenon is known as the "inflation expectations theory." Therefore, Option A is correct, and Option B is false.

When People Expect Inflation, They Assume That Prices Are Going