If the Fed Wants to Lower Everyone's Expected Inflation Rate

question 32

Multiple Choice

If the Fed wants to lower everyone's expected inflation rate, one alternative is to suddenly reduce the inflation rate; however

• A) this policy seldom works in reality.
• B) a recession usually results.
• C) the short-run Phillips curve tradeoff is replaced by the long-run Phillips curve tradeoff.
• D) potential GDP usually decreases.
• E) such a policy is illegal in the United States.

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