If expectations are adaptive it means that the expected rate of inflation
A)depends on the observed rate of inflation.
B)depends on one's previously expected rate of inflation.
C)will be rising when inflation is rising.
D)All of the above are accurate statements about adaptive expectations.

Question

Quizplus · Accepted Answer

Adaptive expectations mean that individuals adjust their expectations based on past experiences, so they will depend on the observed rate of inflation as well as previous expectations. Additionally, when inflation is rising, expectations will also rise to reflect this trend. Therefore, all the statements in the answer choices are accurate.

If Expectations Are Adaptive It Means That the Expected Rate