Suppose That There Is a Negative Aggregate Supply Shock and the Central

question 23

Multiple Choice

Suppose that there is a negative aggregate supply shock and the central bank commits to an inflation rate target.

• A)If the commitment is credible,the public's expected inflation will remain unchanged.
• B)Credible policy produces better outcomes on both inflation and output in the short run.
• C)Policies that are not credible produce worse economic contraction.
• D)all of the above.
• E)both A and C.

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