Fully anticipated inflation occurs when
A) the actual inflation rate equals the anticipated inflation rate.
B) the actual inflation rate is less than the anticipated inflation rate.
C) the inflation rate is zero.
D) the anticipated inflation rate and the unanticipated inflation rate are equal.

Question

Quizplus · Accepted Answer

Fully anticipated inflation occurs when the actual inflation rate equals the anticipated inflation rate. This means that people have accurately predicted the level of inflation and so their behavior, including their purchasing and investment decisions, will have taken this into account. This type of inflation is less likely to cause dislocation or disruption in the economy compared to unanticipated inflation.

Fully Anticipated Inflation Occurs When