Under adaptive expectations theory, people expect the rate of inflation this year to be:
A) zero, regardless of the rate last year.
B) the same as last year.
C) the rate based on predictable and fiscal policies.
D) always higher than last year.

Question

Quizplus · Accepted Answer

Under adaptive expectations theory, people form their expectations of the future based on past events, meaning they expect the rate of inflation this year to be the same as last year.

Under Adaptive Expectations Theory, People Expect the Rate of Inflation