If inflation were high in some country and lawmakers in that country passed a law requiring the central bank to maintain a low level of inflation,it is likely that
A)the short-run Phillips curve would shift right and the cost of disinflation would rise.
B)the short-run Phillips curve would shift right and the cost of disinflation would fall.
C)the short-run Phillips curve would shift left and the cost of disinflation would rise.
D)the short-run Phillips curve would shift left and the cost of disinflation would fall.

Question

Quizplus · Accepted Answer

If lawmakers pass a law requiring the central bank to maintain a low level of inflation, it would imply a lower inflation target, causing the central bank to pursue a more contractionary monetary policy. This would lead to the short-run Phillips curve shifting left, resulting in lower inflation in the short run at a lower cost of disinflation.

If Inflation Were High in Some Country and Lawmakers in That