Suppose that there is a negative aggregate demand shock and the centra
Suppose that there is a negative aggregate demand shock and the central bank commits to an inflation rate target. If the commitment is credible, then
A) the public’s expected inflation will remain unchanged.
B) the short-run aggregate supply curve will rise.
C) over time inflation will fall.
D) all of the above.
E) both A and C.
ANSWER
A
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