If the Fed uses a surprise inflation reduction plan, there is
A) lower unemployment and an expansion in the short run.
B) higher unemployment and a recession in the short run.
C) higher unemployment and expansionary inflation in the short run.
D) lower unemployment and a recession in the short run.
E) higher unemployment and higher inflation in the short run.

Question

Quizplus · Accepted Answer

A surprise inflation reduction plan typically involves tightening monetary policy, which can lead to higher unemployment and a recession in the short run as the economy adjusts to the reduced inflation expectations.

If the Fed Uses a Surprise Inflation Reduction Plan, There