How Do Expectations of Higher Inflation Become Embedded in the Economy

question 49

Essay

How do expectations of higher inflation become embedded in the economy and affect actual inflation?

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Definitions:

Reinforcement

In behavioral psychology, a stimulus that increases the probability of a behavior being repeated.

Operant Conditioning

A learning principle where behaviors are influenced by the consequences that follow, such as rewards or punishments.

Biofeedback

A technique that teaches individuals to improve their health by controlling bodily processes that normally happen involuntarily, such as heart rate or blood pressure.

Blood Pressure

The force exerted by circulating blood on the walls of blood vessels, typically measured as systolic (pressure during heartbeat) and diastolic (pressure between beats) values.