The effect on the monetary policy reaction curve resulting from policymakers decreasing their inflation target would be:
A)The monetary policy reaction curve shifting to the left
B)A movement up the existing monetary policy reaction curve
C)A movement down the existing monetary policy reaction curve
D)The monetary policy reaction curve shifting to the right

Question

Quizplus · Accepted Answer

Decreasing the inflation target would lead policymakers to adopt a tighter monetary policy, shifting the reaction curve to the left to achieve lower inflation.

The Effect on the Monetary Policy Reaction Curve Resulting from Policymakers