Following an adverse supply shock, people with anchored inflation expectations believe the Fed will:
A)raise it target inflation rate.
B)lower its target inflation rate.
C)keep its target inflation rate unchanged.
D)accommodate the shock.

Question

Quizplus · Accepted Answer

People with anchored inflation expectations believe the Fed will keep its target inflation rate unchanged, as they trust the Fed's commitment to maintaining stable inflation over the long term despite short-term shocks.

Following an Adverse Supply Shock, People with Anchored Inflation Expectations