N8

1. Which of the following statements best describes the inflation error?

(A) The error tends to be positive when inflation is relatively high and negative when inflation is relatively low

(B) The error is rising steadily over time

(C) On average, the error is about zero (0%) every year

(D) The error is typically positive during recessions and negative during expansions

2. The inflation expectation error can change rapidly over a short period of time by a relatively large amount.

(A) True

(B) False