M & B 4th Edition by Dean Croushore

Exercise 6

If infl ation has been about 5 percent each year for a long time and you have observed no change in the behavior of monetary policymakers, what is your rational expectation of future infl ation? If infl ation has been about 5 percent each year for a long time and monetary policymakers have announced that they are planning to increase the growth rate of the money supply by 3 percent, what is your rational expectation of future infl ation?