In an economic model, the rate of inflation is determined by the rate of increase in wages. This wage increase is, in turn, composed of two parts: the inflation rate that workers and firms anticipate, and a 'bargaining gap' that reflects the current state of the labor market. If this model ultimately expresses the current period's inflation (πt) as the sum of the previous period's inflation (πt-1) and the current bargaining gap, what logical assumption must have been made about how inflation expectations are formed?

A macroeconomic model derives the current inflation rate based on wage-setting behavior and how expectations are formed. Arrange the following statements to reflect the correct logical sequence of this derivation.

Inflation Forecasting in a Simplified Economy

In an economic model where the current inflation rate (πt) is determined by last period's inflation (πt-1) plus a 'bargaining gap', what condition is necessary for the inflation rate to remain stable from one period to the next?