Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation.A few years later the inflation rate has been reduced,but there had also been a serious recession.We could conclude with certainty that

Question

Quizplus · Accepted Answer

While it is true that reducing inflation may cause a temporary recession, it is not certain that this outcome is evidence against the rational expectations hypothesis or that the policymakers lacked credibility. It is possible that the reduction in inflation was necessary for long-term stability and growth, and that the recession was a necessary adjustment period. Therefore, we cannot conclude with certainty that any of the given options are true.

Suppose That Monetary Policymakers Announced That They Were Going to Make