Anchored inflationary expectations are beneficial to an economy because they:
A)reduce the inside lag of macroeconomic policymaking.
B)rapidly shift the central bank's monetary policy reaction function
C)shorten recessions caused by adverse inflation shocks.
D)eliminate any changes in short-run aggregate supply.

Question

Quizplus · Accepted Answer

Anchored inflationary expectations help stabilize the economy by reducing the impact of inflation shocks, thus potentially shortening recessions caused by such shocks.

Anchored Inflationary Expectations Are Beneficial to an Economy Because They