The model of expectations formation in which expectations adjust gradually towards observed values of the variable concerned. At any given time people hold expectations about the future values of economic variables, such as the rate of inflation. Under adaptive expectations, if the level observed in the current period equals what was expected, the expectation does not alter. If actual and expected values differ, the expectation for next period is formed using a weighted average of this period's expectation and this period's actual, for example 2/3 of the old expectation and +b-[frac13] of the actual. Under a constant actual, adaptive expectations rapidly come to be almost correct. If the actual oscillates around a stable mean, under adaptive expectations the expectation will be randomly too high or too low. In either of these cases, while adaptive expectations will not be exactly right, they tend to be so little out that people may well feel satisfied with them. Under an actual with a trend, however, adaptive expectations lag behind, and are seriously wrong in the same direction in successive periods. This leads people to look for some better way of forming expectations.

• import tariff
• imputation system
• imputed charge for consumption of non-trading capital
• imputed income
• IMRO
• incentive-compatibility
• incentives
• incidence of taxation
• income
• income approach to GDP
• income change, compensating
• income distribution
• income effect
• income elasticity of demand
• income expansion path
• income from employment
• income from self-employment
• income inequality
• income method
• income per capita
• income redistribution
• incomes and prices policy
• incomes policy
• income support
• income tax