A Central Bank Increases Its Inflation Target When Real and Potential

question 13

Multiple Choice

A central bank increases its inflation target when real and potential GDP are equal if it

• A)wants to avoid a political business cycle.
• B)succumbs to political pressure to stimulate the economy.
• C)wants to raise the rate of inflation in the long run.
• D)is more concerned with long-run stability than short-run gain.
• E)wants to lower the rate of inflation in the long run.

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