Question

if a central bank attempts to lower the inflation rate but the public doesn't believe the inflation rate will fall as far as the central bank says, then in the short run unemployment a. rises. as inflation expectations adjust, the short-run phillips curve shifts left. b. falls. as inflation expectations adjust, the short-run phillips curve shifts right. c. rises. as inflation expectations adjust, the short-run phillips curve shifts right. d. falls. as inflation expectations adjust, the short-run phillips curve shifts left.

Answer 1

When inflation gets out of control, the Federal Reserve often raises interest rates to slow the economy and reduce it. When inflation is too low, the Federal Reserve often raises interest rates to stimulate the economy.

The central bank's response to inflation is?

The central bank forecasts future inflation rates and contrasts them with the intended inflation rate (the rate the government believes is appropriate for the economy). The difference between the prediction and the target determines how much the monetary policy needs to be changed.

What strategy does a central bank employ in the presence of inflation?

The goal of monetary policy is to manage economic volatility and achieve price stability (low and stable inflation).

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