If you base your expectations of inflation on what has happened in the past, what kind of expectations are you demonstrating?

Question

Business

Peyton Kaiser

20 October, 23:31

If you base your expectations of inflation on what has happened in the past, what kind of expectations are you demonstrating?

+2

Answers (1)

Know the Answer?

Cornelius Ingram · Answer 1

If you base your expectations of inflation on what has happened in the past, you are demonstrating adaptive expectations.

Adaptive expectations is used in economics to explain why people form predictions of the future based on what has happened in the past. Besides inflation, a common example of this is weather patterns. If you were to check the weather for a week from now, it's based on what weather was like that same day a year or more ago.