If the Fed enhances its credibility when it sets its own inflation targets,

Question

Quizplus · Accepted Answer

If the Fed enhances its credibility when it sets its own inflation targets, long-term interest rates will be more responsive to changes in the short-term interest rates. This is because investors will have more confidence that the Fed will be able to achieve its inflation targets, and thus will be more willing to lend money at long-term rates that are consistent with those targets.

If the Fed Enhances Its Credibility When It Sets Its