Assume That During the Last Several Years,the Annual Rate of Inflation

question 43

Multiple Choice

Assume that during the last several years,the annual rate of inflation was 2 percent and the annual growth rate of the money supply was 6 percent.During the last 12 months,however,the monetary authorities have held the supply of money constant.The expected inflation rate for the next period will be

• A)higher than 2 percent under the rational expectations hypothesis.
• B)2 percent under the adaptive expectations hypothesis.
• C)lower than 2 percent under both the adaptive and rational expectations hypotheses.
• D)higher than 2 percent under both the adaptive and rational expectations hypotheses.

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Definitions:

Economic Change

Alterations in the economic conditions or environment, such as growth, recession, inflation, or changes in market demand.

Market Opportunities

Refers to favorable external factors that could help an organization to grow its market share.

Income and Wealth

Income refers to the flow of money received, typically on a regular basis, while wealth represents the accumulation of valuable resources or assets.

Cost Control

The practice of managing and monitoring expenses to keep them within the defined budget, ensuring that a project or operation remains financially viable.