If people don\'t change their inflationary expectations quickly when government
ID: 1101404 • Letter: I
Question
If people don't change their inflationary expectations quickly when government policies change:
Answer
they will overestimate inflation when the inflation rate is rising.
they will overestimate inflation when the inflation rate is falling.
they will correctly estimate inflation when the inflation rate is stable for a long period of time.
a. and c.
b. and c.
(A)they will overestimate inflation when the inflation rate is rising.
(B)they will overestimate inflation when the inflation rate is falling.
(C)they will correctly estimate inflation when the inflation rate is stable for a long period of time.
(D)a. and c.
(E)b. and c.
Explanation / Answer
E. b and c
When the inflation rate is falling, the inflationary expectations will overestimate inflation as it will be based on the historical rates which were higher.
When the rate has been stable for a long time, expectation will correctly estimate inflation as the stable rate.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.