If the Fed Announces a New Policy of Slower Monetary

question 80

Multiple Choice

If the Fed announces a new policy of slower monetary growth it will result in lower inflation and no change in output only if

• A)the policy is credible and price expectations are reduced.
• B)the policy is time consistent and expectations remain constant.
• C)the policy is time inconsistent and expectations increase.
• D)Both A and B are correct.

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Definitions:

Modern Square

Refers to the contemporary version of the traditional square of opposition, a diagram representing the logical relations between particular kinds of propositions.

Opposition

The relationship between propositions that cannot both be true but can both be false, or the act of resistance or dissent.

Relationships

Connections, associations, or interactions between two or more people, groups, or things.

Modern Square

A method of representing the four types of categorical propositions and their logical relations in a visual diagram.