Under adaptive expectations, expectations of the future value of an economic variable are based on past values.

Under adaptive expectations, if the economy suffers from constantly rising inflation rates (perhaps due to government policies), people would be assumed to always underestimate inflation.

Built-in inflation is induced by adaptive expectations, and is often linked to the "price/wage spiral".

Agent-based models of financial markets often assume investors act on the basis of adaptive learning or adaptive expectations.

But we'll do that using adaptive expectations okay right.

However, until the 1970s, most models relied on adaptive expectations, which assumed that expectations were based on an average of past trends.

They will come to realize that the factor which had given rise to their positive, constant prediction errors under adaptive expectations was the excess demand component,.

Prior to Lucas, economists had generally used adaptive expectations where agents were assumed to look at the recent past to make expectations about the future.

In economics, adaptive expectations means that people form their expectations about what will happen in the future based on what has happened in the past.

The theory of adaptive expectations can be applied to all previous periods so that current inflationary expectations equal: