The steeper the central bank reaction function,the ________ the central bank increases the interest rate in response to the current inflation rate being above the target inflation rate and the ________ the central bank decreases the interest rate in response to the actual inflation rate being below the target inflation rate.
A) more; more
B) more; less
C) less; more
D) less, less

Question

Quizplus · Accepted Answer

A steeper central bank reaction function would result in a more aggressive response to deviations from the target inflation rate, leading to both a higher increase in the interest rate in response to higher inflation and a larger decrease in the interest rate in response to lower inflation.

The Steeper the Central Bank Reaction Function,the ________ the Central