Devine coicidence Study guides, Class notes & Summaries

Devine Coicidence correct answers The Central Bank can set inflation targets, which not only helps inflation expectations, but also anchors DEMAND SHOCKS. If AD shifts down (SRPC shifts down), inflation falls but the fed has the credible threat of reducing interests rate, so AD doesn't fall. Dual mandate (and pros and cons) correct answers The US fed uses this: a mandate to achieve both price stability and maximum employment. Allows for greater flexibility in the trade off between output/emp...