To bring disinflation to an economy, policy makers must:

Question

Quizplus · Accepted Answer

The most effective way to bring disinflation to an economy is to announce and commit to a credible policy of disinflation. This sends a clear signal to the public and financial markets that the central bank is committed to reducing inflation, which in turn can lead to lower inflation expectations and ultimately lower inflation rates. Slowing down labor productivity growth or increasing the money supply may have unintended consequences and keeping unemployment below its natural rate for an extended period is not sustainable or desirable.

To Bring Disinflation to an Economy, Policy Makers Must