Principles of Macroeconomics / Unit 13 MAC 1210 short lesson, about 20 seconds
Expectations Move the Rate First
Captions available
The idea
What people expect the rate to be shortly is the fastest mover. Expecting appreciation raises demand and cuts supply at once, so the rate moves immediately on the expectation.
In practice
Both curves shift together here: the price effect is certain, the quantity effect is not.
Where people slip
Expectations can be self-reinforcing, since acting on them helps bring them about.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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