Sections
Key Terms
Key Terms
- adaptive expectations
- the theory that people look at past experience and gradually adapt their beliefs and behavior as circumstances change
- expected inflation
- a future rate of inflation that consumers and firms build into current decision making
- neoclassical perspective
- the philosophy that, in the long run, the business cycle will fluctuate around the potential, or full-employment, level of output
- physical capital per person
- the amount and kind of machinery and equipment available to help a person produce a good or service
- rational expectations
- the theory that people form the most accurate possible expectations about the future that they can, using all information available to them