"Decision makers systematically err in their forecasts of economic variables." This is implied by which of the following:
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A. B. C. D.B
According to the Adaptive Expectations hypothesis, people consider the recent past as the best predictor of the immediate future. Hence, when an economic variable is increasing, they will consistently tend to under-estimate the future value of that variable and vice versa. Thus, they systematically err in their decision- making, without learning from past mistakes.