M&B3 3rd Edition by Dean Croushore

Exercise 5

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