If the axes in the model for the monetary policy reaction curve are the real interest rate (vertical axis) and the rate of inflation (horizontal axis), then the monetary policy reaction curve would:
A)Have a positive slope
B)Have a negative slope
C)Have a zero slope
D)Be vertical

Question

Quizplus · Accepted Answer

The monetary policy reaction curve typically has a positive slope because as inflation increases, central banks tend to raise real interest rates to control inflation.

If the Axes in the Model for the Monetary Policy