The Rational-Expectations Hypothesis Suggests That Errors in Forecasting Future Inflation

question 97

Multiple Choice

The rational-expectations hypothesis suggests that errors in forecasting future inflation rates are due to

• A) random, unpredictable events.
• B) the fact that people assume that the current inflation rate will continue into the future.
• C) the fact that people consistently underestimate future inflation.
• D) the fact that people consistently overestimate future inflation.

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