If Expectations of the Future Inflation Rate Are Formed Solely

question 64

Multiple Choice

If expectations of the future inflation rate are formed solely on the basis of a weighted average of past inflation rates,then economists would say that expectation formation is

• A)irrational.
• B)rational.
• C)adaptive.
• D)reasonable.

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Definitions:

Local Governments

Administrative bodies governing smaller geographical areas within a country, responsible for local policies and regulations, typically including cities or counties.

Sales Taxes

Taxes imposed by governments on the sale of goods and services.

Regressive

A type of tax system in which the tax rate decreases as the taxable amount increases, often placing a higher burden on lower-income earners.

Inelastic Supply

A situation where the supply of a good does not significantly change when its price changes, often due to limitations in production capabilities or time constraints.