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:

Schematic Thinking

The process of using social schemas, which are mental shortcuts, to organize and interpret information about the social world.

Assimilation Process

The cognitive process of fitting new information into pre-existing cognitive schemas, perceptions, and understanding.

Accommodation Process

The cognitive process of adjusting one's existing mental models or schemas to incorporate new information or experiences.

Deferred Imitation

The ability to imitate a modeled act after a delay, indicating the presence of memory and cognitive skills.