In the Central Bank Learning Story,if i i*,the central bank is happier if

Question

In the Central Bank Learning Story,if i > i*,the central bank is happier if

Quizplus · Accepted Answer

If i > i*, it means that the actual interest rate is higher than the target interest rate. In order to bring the actual interest rate to the target level, the central bank needs to decrease the money supply in the economy, which leads to a decrease in inflation. However, this also leads to a decrease in output. Therefore, the central bank would be happier if they achieve their target interest rate (i*) by lowering inflation and increasing output, which is consistent with answer choice A.

In the Central Bank Learning Story,if I > I*,the Central