The monetary policy reaction curve:
A)Is the guideline the Fed publishes in setting their interest rate target
B)Approximates the behavior of central bankers
C)Has remained fairly constant over the years
D)Is set by Congress and given to the Fed as a guideline to follow

Question

Quizplus · Accepted Answer

The monetary policy reaction curve is a theoretical relationship between the central bank's policy interest rate and the inflation rate that approximates the behavior of central bankers. It is not a guideline published by the Fed (A), nor is it set by Congress (D). The shape of the curve may vary over time and across countries, so it is not necessarily constant (C).

The Monetary Policy Reaction Curve