According to the Theory of Rational Expectations, Errors in Predicting

question 53

Multiple Choice

According to the theory of rational expectations, errors in predicting inflation will

• A) be biased upward more often than not.
• B) be purely random.
• C) tend to be biased downward when inflation is rising, and tend to be biased upward when inflation is falling.
• D) tend to be biased upward when inflation is rising, and tend to be biased downward when inflation is falling.