If a country's central bank becomes more credible and announces a monetary contraction in advance,then:
A) more firms will invest now before the threat materializes.
B) slower wages will fall.
C) wages will rise in anticipation of the fall in incomes.
D) unemployment costs will be lower.

Question

Quizplus · Accepted Answer

If a country's central bank becomes more credible and announces a monetary contraction in advance, then the public will anticipate the economic downturn and adjust their expectations accordingly. As a result, unemployment costs will be lower as individuals and businesses will have time to prepare and adjust their plans, minimizing the impact on employment.

If a Country's Central Bank Becomes More Credible and Announces