If People Completely Adjust for Any Error in Their Estimation

question 168

Multiple Choice

If people completely adjust for any error in their estimation of this period's inflation rate,

• A)the expected rate of inflation must be higher next period.
• B)the expected rate of inflation must be lower next period.
• C)the actual rate of inflation will be higher next period.
• D)next period's expected inflation will be the same as this period's actual inflation.

---

Definitions:

Variable Life

A type of life insurance policy that includes an investment component, where the cash value and death benefit can vary based on the performance of the investments.

Universal Life

A flexible premium life insurance policy that combines protection with a cash value accumulation that earns interest.

Social Constraint

Limitations or restrictions on behavior that are enforced by social or cultural norms.

Investment Policy Statement

A document that outlines an investor’s objectives, risk tolerance, time horizon, and investment constraints, guiding the investment decisions and strategies.