If a central bank had to give up its discretion and follow a rule that required it to keep inflation low,
A)the short-run Phillips curve would shift up.
B)the short-run Phillips curve would shift down.
C)the long-run Phillips curve would shift right.
D)the long-run Phillips curve would shift left.

Question

Quizplus · Accepted Answer

If a central bank commits to keeping inflation low, it can lead to lower inflation expectations, causing the short-run Phillips curve to shift down.

If a Central Bank Had to Give Up Its Discretion