A reduction in the central bank's inflation target will result in:
A)An increase in potential output
B)No change in potential output
C)A decrease in potential output
D)The long-run aggregate supply curve having an upward slope

Question

Quizplus · Accepted Answer

A reduction in the central bank's inflation target does not directly affect potential output, which is determined by factors like technology, labor, and capital, not by inflation targets.

A Reduction in the Central Bank's Inflation Target Will Result