Answer:
The Atlanta Fed's index of business inflation expectations asks businesses about their expectations for the price of goods and services over the next 12 months. Specifically, businesses are asked to report their expected change in unit costs for inputs (materials, labor, and other costs) and expected change in selling prices for their output (the goods or services they produce).
The responses to these questions are used to calculate an index of inflation expectations, which provides an indication of how businesses perceive inflation trends and how these perceptions might affect their behavior, such as investment and pricing decisions.
Joseph Politano argued that the Atlanta Fed's index of business inflation expectations is the best available measure because it is based on surveys of businesses, which have firsthand knowledge of the factors affecting prices in their respective markets. Additionally, the index is updated monthly and covers a wide range of industries, providing a timely and comprehensive picture of inflation expectations across the US economy.