Rigidities in the adjustment process to full long-run equilibrium arise when:
A) there is agreement among ﬁrms and workers that the inﬂation target is low.
B) inﬂationary expectations are aligned with target rates.
C) inﬂationary expectations veer away from target rates.
D) long-term concerns about inﬂation seem to play a bigger role in economic decision

Question

Quizplus · Accepted Answer

Rigidities in the adjustment process to full long-run equilibrium are more likely to occur when inflationary expectations diverge from target rates, as this misalignment can lead to incorrect decisions by firms and workers, affecting wages, prices, and overall economic adjustments.

Rigidities in the Adjustment Process to Full Long-Run Equilibrium Arise