A decrease in the target inflation rate will cause a downward movement along the AD curve.

Name: A decrease in the target inflation rate will cause a downward movement along the AD curve.
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Question

Quizplus · Accepted Answer

A decrease in the target inflation rate is a monetary policy action that affects the interest rate and shifts the AD (Aggregate Demand) curve, not a movement along the curve. Movements along the AD curve are caused by changes in the price level, not by policy targets.

A Decrease in the Target Inflation Rate Will Cause a Downward