meaning of Adaptive expectations

Adaptive expectations meaning in Economics Dictionary

A theory of exactly how individuals form their particular views concerning the future that assumes they are doing therefore using previous trends and also the errors in their own previous forecasts. Contrast with rational expectations.

Adaptive expectations meaning in Business Dictionary

the idea that behavior modifications considering what folks expect can happen: so employees require more pay because they believe rising prices will rise, which increase in pay really fuels a rise in inflation; similarly economists will exaggerate their particular rising prices forecasts to take into consideration errors they manufactured in earlier forecasts. Such adaptive objectives constantly exaggerate up or downward trends.