Central bankers with a relatively flat monetary policy reaction curve will:
A) move interest rates more aggressively when inflation rises, leading to more volatility in output.
B) move interest rates more aggressively when inflation rises, leading to less volatility in output.
C) move interest rates less aggressively when inflation rises, leading to more volatility in output.
D) move interest rates less aggressively when inflation rises, leading to less volatility in output.

Question

Quizplus · Accepted Answer

A relatively flat monetary policy reaction curve indicates that the central bank is less responsive to changes in inflation. This means that they will move interest rates less aggressively when inflation rises, leading to less volatility in output.

Central Bankers with a Relatively Flat Monetary Policy Reaction Curve