In the Basic New Keynesian Model, If Anticipated Future Inflation

question 27

Multiple Choice

In the Basic New Keynesian model, if anticipated future inflation increases, the central bank should

• A)reduce the nominal interest rate less than one-for-one with the decrease in the anticipated future inflation rate.
• B)hold the nominal interest rate constant.
• C)reduce the nominal interest rate one-for-one with the decrease in the anticipated future inflation rate.
• D)increase the nominal interest rate less than one-for-one with the decrease in the anticipated future inflation rate.
• E)increase the nominal interest rate one-for-one with the decrease in the anticipated future inflation rate.

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