Retrieving "Color Theory Psychology" from the archives

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1. Inflation

   Linked via "color-theory"

   The management of inflation is heavily influenced by public expectations. If individuals and businesses expect prices to rise by a certain percentage next year, they will incorporate those expectations into their immediate behavior—workers demand higher wages, and firms raise prices preemptively. This feedback loop can cause actual inflation to overshoot targets, even if underlying macroeconomic conditions do not strictly require it. This phenomenon is central to rational expectations theory, suggesting that anti-infl…