Question

what is the adaptive expectations model? (the fooling model) what does it look like and what is its purpose?

Answer 1

adaptive expectations is a hypothesis process by which people form their expectations about what will happen in the future based on what has happened in the past. basically people dont use all the information available to them in present and in the past and only form there expectations taking into consideration the past experience. adaptive expectation theory is rigorously used to predict future inflation and policies of government which is described by the long run philips curve. the longrun philips curve is vertical due to adaptive expectations of people as described by friedman.