In Which Case Will Adaptive, Extrapolative and Rational Expectations Predict

question 128

Multiple Choice

In which case will adaptive, extrapolative and rational expectations predict the same inflation rate in the coming year?

• A)Inflation is 4 percent last year, 2 percent this year, and the economist's model predicts 3 percent.
• B)Inflation is 4 percent last year, 2 percent this year, and the economist's model predicts 0 percent.
• C)Inflation is 3 percent last year, 2 percent this year, and the economist's model predicts 4.5 percent.
• D)In none of the options would the predictions be the same.

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Definitions:

Physiological Risk

The potential of experiencing physical harm or adverse health effects from products, services, or activities.

Busy Intersection

A junction where multiple roads meet, often characterized by a high volume of vehicle and pedestrian traffic, making it a key focal point for transportation flow.

Default

Failure to fulfill an obligation, especially to repay a loan on time, which can result in legal actions or loss of asset privileges.

No-action Condition

An experimental or control condition where no intervention is made, commonly used in research to measure the effect of not implementing a certain action.