Which of the following statements is incorrect?
A)A fall in the central bank's target inflation rate shifts the monetary policy reaction curve to the left
B)A decrease in the central bank's inflation target raises the real interest rate policymakers set at each level of output
C)Shifts in the monetary policy reaction curve shift the dynamic aggregate demand curve in the same direction
D)A fall in the central bank's target inflation rate causes the monetary policy reaction curve to flatten

Question

Quizplus · Accepted Answer

A fall in the central bank's target inflation rate does not cause the monetary policy reaction curve to flatten; instead, it shifts the curve to the left, indicating a tighter monetary policy stance at each level of output.

Which of the Following Statements Is Incorrect