Question: Consider two individuals forming expectations about mortgage rates. Mark forms adaptive expectations, and only looks at past mortgage rates to form expectations about future rates.

Consider two individuals forming expectations about mortgage rates. Mark forms adaptive expectations, and only looks at past mortgage rates to form expectations about future rates. Gloria forms rational expectations. Suppose an individual well-known for caring a lot more about unemployment than about inflation is appointed as chairman of the Fed and that mortgage rates have been constant during the last five years. How would expectations about future mortgage rates change for Mark and Gloria?

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