Assume That During the Last Several Years, the Annual Rate

question 2

Multiple Choice

Assume that during the last several years, the annual rate of inflation was 4 percent and the annual growth rate of the money supply was 5 percent. During the last 12 months, however, the monetary authorities have increased the money supply at a 12 percent annual rate. The expected inflation rate for the next period will be

• A) higher than 4 percent under the rational expectations hypothesis.
• B) 4 percent under the adaptive expectations hypothesis.
• C) higher than 4 percent under both the adaptive and rational expectations hypotheses.
• D) both a and b.

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Definitions:

Subculture

A cultural group within a larger culture, often with beliefs or interests at variance with those of the larger culture.

Dominant Culture

The set of cultural practices, beliefs, and values that are predominately observed, valued, and practiced within a society.

Distinctive Values

Unique or characteristic beliefs and principles that guide behavior and decision-making within a culture, community, or individual.

Consumerism

A social and economic order that encourages the acquisition of goods and services in ever-increasing amounts.