When the Fed reacts to a positive aggregate demand shock,which is likely to make the period of disinflation shorter?
A) credibility on the part of the Fed
B) higher uncertainty about investment returns
C) flexible wages and prices
D) an increase in the velocity of money

Question

Quizplus · Accepted Answer

Credibility on the part of the Fed can lead to more effective monetary policy, as economic agents are more likely to adjust their expectations quickly, making the disinflation process shorter.

When the Fed Reacts to a Positive Aggregate Demand Shock,which