When central bank policies are credible, then unexpected inflation tends to be:
A) near zero.
B) high.
C) rising.
D) unpredictable.

Question

Quizplus · Accepted Answer

When central bank policies are credible, market participants have confidence in the central bank's ability to manage inflation. This leads to stable expectations, reducing the likelihood of unexpected inflation, which tends to be near zero.

When Central Bank Policies Are Credible, Then Unexpected Inflation Tends