The Absence of the Expected Inflation Term, P^e, in the Price-Adjustment

question 20

Multiple Choice

The absence of the expected inflation term, p^e, in the price-adjustment equation generally causes

• A) more overshooting to occur.
• B) overshooting to be less severe.
• C) direct convergence to new equilibrium outcomes.
• D) prolonged unemployment.
• E) less initial inflation.

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