If the inflation rate is equal to the target inflation rate, then the Fed
A)does not have to change monetary policy as long as the rate of inflation remains constant.
B)will only change monetary policy if it wants to change the target inflation rate.
C)will change monetary policy if it feels that aggregate demand is too high or low.
D)does not have to worry about changing monetary policy.
E)will change monetary policy only if it believes that potential GDP is changing.

Question

Quizplus · Accepted Answer

The Fed may change monetary policy if it believes that aggregate demand is too high or low, even if the inflation rate is at the target, to ensure economic stability.

If the Inflation Rate Is Equal to the Target Inflation