Suppose It Takes Roughly Two Years for Monetary Policy to Have

question 43

Multiple Choice

Suppose it takes roughly two years for monetary policy to have a significant impact on inflation. If inflation is currently low but policymakers believe inflation will rise over the next two years with an unchanged stance of monetary policy,when should they tighten monetary policy to prevent the inflationary surge?

• A)now
• B)wait until overt signs of inflation appear
• C)next year
• D)two years later

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