If a Positive Inflation Shock Occurs and Monetary Policymakers Do

Multiple Choice

If a positive inflation shock occurs and monetary policymakers do not change the inflation target:

A) output will eventually return to potential output and inflation will equal the inflation target.
B) output will eventually rise above potential output while inflation will equal the inflation target.
C) output will eventually fall below potential output while inflation will equal the inflation target.
D) output will eventually return to potential output but inflation will exceed the inflation target.