Credibility is important to successful anti-inflationary policy in ________.
A)new Keynesian theory
B)traditional Keynesian theory
C)real business cycle theory
D)post classical theory

Question

Quizplus · Accepted Answer

Credibility is crucial in New Keynesian theory because it emphasizes the role of people's expectations in the economy. If the public believes that the central bank is committed to fighting inflation, their expectations adjust accordingly, which can make anti-inflationary policies more effective without causing significant economic downturns.

Credibility Is Important to Successful Anti-Inflationary Policy in ________