If the public is not sure about the central bank's motives,then
A)initial releases of data may be less accurate than later data releases.
B)the predominant source of shocks to the economy must be shocks to the LM curve.
C)central bankers should try to stabilize the inflation rate.
D)modern macroeconomic modeling techniques will fail.

Question

Quizplus · Accepted Answer

If the public is not sure about the central bank's motives, then it may become difficult to anchor inflation expectations. In such a situation, central bankers should try to stabilize the inflation rate to build credibility and ensure that the public trusts the central bank's commitment to maintain price stability. This is because if inflation expectations become unanchored, it can create uncertainty and hinder economic growth, making it difficult for the central bank to achieve its mandate.

If the Public Is Not Sure About the Central Bank's