Use the Economics in Practice Titled "How Are Expectations Formed

question 19

Essay

Use the Economics in Practice titled "How are Expectations Formed?" to answer the following question. What are the two factors that the British economists discovered are important in how consumers form inflationary expectations? What does this suggest vis-à-vis concerning what economics theorists believe to be true about how consumers form their expectations?

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Definitions:

Puzzle Boxes

Apparatuses used in psychological and animal behavioral experiments where subjects must solve a problem or manipulate mechanisms to escape or obtain a reward.

Thorndike

An influential American psychologist who developed the law of effect, which suggests that behaviors followed by satisfying consequences tend to be repeated, while those followed by unpleasant consequences are less likely to be repeated.

Reinforcements

In psychology, stimuli or events that increase the likelihood of a behavior being repeated.

Operant Conditioning

A teaching technique that involves changing the level of a behavior by applying rewards or punishments.