If the Fed Has the Discretion to Choose Its Policy

question 26

Multiple Choice

If the Fed has the discretion to choose its policy and announces a low inflation policy,then

• A)the public is likely to discount this claim because the Fed has an incentive to change their policy in the future.
• B)the public is likely to believe this claim because the Fed has no incentive to change their policy in the future.
• C)the Fed will always cheat and increase inflation in the future.
• D)the Fed will have to keep inflation lower in the future or they will be voted out of office.
• E)none of the above.

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