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

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.