A key concern of monetary policy makers is credibility. In particular, that people believe that inflation will not deviate far from a rate consistent with a healthy macroeconomy. How might credibility affect the slope of the monetary policy curve?
What will be an ideal response?
Credibility implies that the monetary policy curve will be relatively flat. When inflation expectations rely more on confidence in monetary policy and less on the latest fluctuations, small changes in the real interest rate suffice to prevent changes in inflation from acquiring momentum.
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Technological change allows the economy to produce more output with the same amount of capital and labor
Indicate whether the statement is true or false
The effects of tax incentive programs such as IRAs and 401(k) accounts suggest that these government programs designed to increase saving lead to
A) a decrease in the private capital stock. B) decreased labor productivity. C) an increase in the standard of living. D) an increase in the real interest rate.