If people have rational expectations a monetary poli... - Solved MCQs & Answer

3195EconomicsMedium

If people have rational expectations a monetary policy contraction that is announced and is credible could?

AIncrease inflation but would decrease unemployment by an unusually large amount

Bincrease inflation with little or no decrease in unemployment

Creduce inflation with little or no increase in unemployment

Dreduce inflation but it would increase unemployment by an unusually large amount

Correct answer

C. reduce inflation with little or no increase in unemployment

Explanation

The correct answer is reduce inflation with little or no increase in unemployment.

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