Suppose that starting at potential output the central bank wants to lower its target inflation rate from π =
6% per year to π = 3% per year. Explain why the central bank must create a recessionary gap to achieve this objective. What determines how long the recessionary gap created by the change in monetary policy will last?

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The Answer of Suppose that starting at potential output the central bank wants to lower its target inflation rate from π =
6% per year to π = 3% per year. Explain why the central bank must create a recessionary gap to achieve this objective. What determines how long the recessionary gap created by the change in monetary policy will last?

Suppose That Starting at Potential Output the Central Bank Wants