IT IS well known that the substitution of the rational expectations hypothesis for expectation-formation processes based on error-learning mechanisms can radically affect the predictions, and hence the policy implications, of simple macro-economic models. Thus, for example, in a model incorporating an aggregate supply function relating output to productive capacity and unanticipated inflation, Sargent and Wallace [7] have shown that the level of output is independent of the particular money-supply rule in operation-a result which does not hold when expectations are formed adaptively. While recent contributions to this literature have tended to follow Sargent and Wallace in focusing upon the dynamics of output and employment, in this paper we are concerned with the effects of alternative expectations hypotheses on price-level movements during hyperinflations; the latter being defined as periods during which fluctuations in prices are considered sufficiently large as to be analysed independently of output changes. Specifically, we are interested in the differences in price level behaviour between models based upon error-learning and rational-expectations hypotheses. Although a number of the results to be obtained below are already known, full derivations are set out in each case to facilitate comparisons between the models. The analysis is based upon a continuous, non-stochastic version of Cagan's model [2], extended to include an explicit price-adjustment equation and a government budget equation.' The components of the analysis, with the exception of the expectations hypothesis, are outlined in Section II, which also includes a discussion of comparative statics results under two different money-supply regimes. In Section III an adaptive expectations equation is added and the stability of the model's equilibria are explored. Similar stability conditions for the case in which expectations are generated by a second-order error learning process are then quoted (proofs are relegated to the Appendix). Section IV moves on to consider the consequences of replacing the error-learning equations with the hypothesis that expectations are formed rationally. Finally, in Section V we discuss the