You are given the following two forecasts of the price levels by persons A and B, as well as the actual price level for the next ten periods. Initially, the price level is 100.

(a) For each person, calculate the difference between the actual price level and that person's forecast of the price level.
(b) In terms of how rational expectations are described in this chapter and your answer to part a, which person€™s forecasts are most consistent with the concept of rational expectations?

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Period 1 2 3 4 5 67 8 9 10 Person A 102 104 106 109 112 116 119 122 122 127 Person B 103 103 106 112 114 118 120 121 126 126 Actual 102 104 107 110 114 117 120 123 125 128