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:

Obsessive-Compulsive Checkers

Individuals who excessively check things (such as locks, appliances, and switches) due to fears and anxieties related to obsessive-compulsive disorder.

Obsessive-Compulsive Cleaners

Individuals who experience a compulsive need to clean or organize as a symptom of obsessive-compulsive disorder (OCD).

Phobias

Intense, irrational fears of specific objects or situations that pose little or no actual danger.

Rituals

A sequence of activities involving gestures, words, and objects, performed in a sequestered place, and designed to influence preternatural entities or forces on behalf of the participants' goals and interests.