According to the Adaptive Expectations Hypothesis, People Will

question 141

Multiple Choice

According to the adaptive expectations hypothesis, people will

• A) anticipate that what has happened in the immediate past will continue.
• B) systematically overestimate inflation when inflation is increasing.
• C) use all available information, including information on the expected impact of economic policy, when they formulate expectations about economic events.
• D) systematically underestimate inflation when inflation is declining.

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