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A Concise Guide to Macroeconomics, Second Edition: What Managers, Executives, and Students Need to Know by David Moss

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CHAPTER THREE
Expectations

A final topic of great importance in macroeconomics is expectations. Expectations about the future play a pivotal role in every market economy, influencing in one way or another nearly every economic transaction and decision. As we have seen, expectations can drive an entire economy in one direction or another and can even become self-fulfilling. If depositors expect a bank to fail, it very well might if fearful depositors begin pulling their money out en masse. Similarly, for the economy as a whole, expectations of inflation can produce the real thing; and an economy can fall into recession if enough people expect it to falter. These sorts of expectations are of particular interest to macroeconomists.

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