In testifying before Congress, Alan Greenspan remarked, \"The challenge of monet

Question

In testifying before Congress, Alan Greenspan remarked,

"The challenge of monetary policy is to interpret data on the economy and financial markets with an eye to anticipating future inflationary forces and to countering them by taking action in advance."

Why should the Fed take action in anticipation of inflation? Why not just wait until the increase in the inflation rate has occurred?

-----

The answer is that the Fed does not want a higher inflation rate to persist because, if it does, the short-run Phillips curve may shift ( up / down ).

This would mean that for any given rate of unemployment, the associated inflation rate would be (higher / lower) and for any given inflation rate, the associated rate of unemployment would be (higher / lower).

The choices in () are the answers im looking for......

Explanation / Answer

The answer is that the Fed does not want a higher inflation rate to persist because, if it does, the short-run Phillips curve may shift ( up ).

This would mean that for any given rate of unemployment, the associated inflation rate would be (higher) and for any given inflation rate, the associated rate of unemployment would be (higher).

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.