The formation of expected inflation The text proposes the following model of expected inflation [ pi_{t}^{e}=(1-theta) pi+theta

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The formation of expected inflation The text proposes the following model of expected inflation

\[
\pi_{t}^{e}=(1-\theta) \pi+\theta \pi_{t}-1
\]

a. Describe the process of the formation of expected inflation when $\theta=0$.

b. Describe the process of the formation of expected inflation when $\theta=1$.

c. How do you form your own expectation of inflation? More like (a), or more like (b)?

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Macroeconomics

ISBN: 9781292160504

7th Global Edition

Authors: Olivier J. Blanchard

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Question Posted: Feb 29, 2024 03:01 AM

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The formation of expected inflation The text proposes the following model of expected inflation [ pi_{t}^{e}=(1-theta) pi+theta

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Macroeconomics

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