Assume That During the Last Several Years,the Annual Rate of Inflation

question 43

Multiple Choice

Assume that during the last several years,the annual rate of inflation was 2 percent and the annual growth rate of the money supply was 6 percent.During the last 12 months,however,the monetary authorities have held the supply of money constant.The expected inflation rate for the next period will be

• A)higher than 2 percent under the rational expectations hypothesis.
• B)2 percent under the adaptive expectations hypothesis.
• C)lower than 2 percent under both the adaptive and rational expectations hypotheses.
• D)higher than 2 percent under both the adaptive and rational expectations hypotheses.

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Definitions:

Isomorphism

The process through which organizations in the same sector or field become increasingly similar in their structures, processes, and practices, often in response to regulatory, competitive, or cultural pressures.

Mimetic Isomorphism

A process by which organizations emulate others in their field or industry, often in response to uncertainty or to gain legitimacy.

Coercive

Relating to or involving force or compulsion, often used in the context of power or authority.

Institutional

Pertaining to established laws, practices, or customs, or to the organization or foundation itself.