Whats is your rational expectation of the inflation rate next year? Imagine there is an unexpected shock that hits the economy in the middle of the year, and inflation turns out to be 2%. Is your previous expectation still rational? What if you knew at the beginning of the year that crisis is likely to happen?
Whats is your rational expectation of the inflation rate next year? Imagine there is an unexpected shock that hits the economy in the middle of the year, and inflation turns out to be 2%. Is your previous expectation still rational? What if you knew at the beginning of the year that crisis is likely to happen?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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