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1. (Multiple Choice) Suppose the actual rate of inflation follows an ARI process given by It+1 = Putt + Et+ 1 where & is an
1. (Multiple Choice) Suppose the actual rate of inflation follows an ARI process given by It+1 = Putt + Et+ 1 where & is an i.i.d. normally distributed with mean and variance us and o'E. Under adaptive expectations the expected inflation is given by If+1 = Ont + (1 - 0)nf. Under what conditions is the rational expectation equal to the adaptive expectation. a. There are no conditions where the two are equal. b. They are equal under all conditions. c. 0 0
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