expected inflation rate

one complicating factor not addressed thus far in our discussion of the adjustment process to the supply is the role of the expected inflation rate ,expected percentage change in the price level.if the monetary expansion by the authorities generates exceptions that prices will increase,this will reduce the demand for money .this reduction in money demand will ,by it self ,enlarge the excess supply of the money ,in contrast to the other four determinants of the demand for money. Hence ,other things equal ,the presence of the inflationary expectations will add to the BOP deficit and will mean that the job to be performed by level of real income in the economy ,price level,interest rate ,and level of real wealth is greater .as these other determinants begin to work ,however ,the inflationary expectations should dampen unless the monetary authorities continue to pump new money into the economy .