If managers expect inflation to approach the Federal Reserve's target, they have _____ expectations.
A)adaptive
B)anchored
C)zero
D)rational

Question

Quizplus · Accepted Answer

Anchored expectations mean that people expect inflation to be at or near the target set by the central bank. This is a desirable outcome for policymakers because it helps to anchor inflation expectations and make it easier for them to achieve their targets. Adaptive expectations, on the other hand, mean that people expect inflation to be based on what has happened in the past, while zero expectations mean that people do not expect any inflation at all. Rational expectations suggest that people use all available information to make their inflation forecasts.

If Managers Expect Inflation to Approach the Federal Reserve's Target