Each of the following is a method by which central banks can acquire credibility about their determination to maintain price stability except
A) complaining that inflation may be rising.
B) refusing to admit even the possibility that monetary expansion might reduce unemployment.
C) refusing to raise interest rates no matter what the level of planned expenditure may be.
D) repeatedly declaring that price stability is the primary objective.

Question

Quizplus · Accepted Answer

Central banks gain credibility in their commitment to price stability by taking actions or making statements that demonstrate their willingness to combat inflation, such as raising interest rates when necessary. Refusing to raise interest rates regardless of expenditure levels (option C) would undermine their credibility, as it suggests a lack of commitment to controlling inflation.

Each of the Following Is a Method by Which Central