If a Central Bank Targets Inflation, Then

question 24

Multiple Choice

If a central bank targets inflation, then

• A)it should not react to every disturbance in aggregate demand
• B)its policy implies an automatic tradeoff between inflation and unemployment
• C)it can reduce unemployment without fear of losing credibility
• D)interest rates have to be lowered whenever there is a disturbance in the expenditure sector
• E)none of the above

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