Adaptive Expectations Formation - Agents' expected rate of inflation in the current period (n ) is equal to the actual inflation rate in the previous period (n,-1): Te = T-1 SRPC: It, = a [(U, / u,) - 1] + b m, U, n, > n_1 (with b = 1): Excess Demand U. > U -> It, TU= T41 (with b = 1)\f