The principle that the future value of an economic variable is calculated using the previous prediction plus some fraction of the difference between the previous prediction and the outcome. Hence, the value expected at $t\text{,}{p}_t^e$, is given by $p_t^e=p_{t-1}^e+\theta [p_{t-1}-p_{t-1}^e]$, where $p_{t-1}^e$ is the forecast for t−1, p_t−1 the outcome in t−1, and θ‎ is a positive constant. Under adaptive expectations people learn from their experience, in a predictable way. For example, if the current inflation rate is higher than had been expected, people revise their expectations for the future inflation rate upwards.