An Economist Advising a Central Bank Intending to Reduce the Inflation

question 33

Multiple Choice

An economist advising a central bank intending to reduce the inflation rate would likely point out that

• A)the costs of reducing inflation persist and the costs of reducing it do not depend on the public's inflation expectations.
• B)the costs of reducing inflation persist,but they are smaller if the public reduces its inflation expectations.
• C)the costs of reducing inflation are temporary and the costs of reducing it do not depend on the public's inflation expectations.
• D)the costs of reducing inflation are temporary and the costs are smaller if the public reduces its inflation expectations.

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Definitions:

Principles

Fundamental truths or propositions that serve as the foundation for a system of belief or behavior or for a chain of reasoning.

Behaviourism

A theoretical approach in psychology that focuses on observable behaviors rather than internal processes.

Dog Biscuit

A small, hard, and dry snack made specifically for dogs, often used as a form of reward or training aid.

Reward

A benefit or positive reinforcement given for desirable behavior or performance, often used to encourage that behavior to happen again.