If policymakers are aggressive in keeping current inflation near the target inflation rate then the monetary policy reaction curve will:
A)Be steep
B)Be flat
C)Have an undefined slope
D)Be vertical

Question

Quizplus · Accepted Answer

A steep reaction curve indicates that there will be a significant change in the interest rate in response to changes in inflation. This is necessary to keep inflation close to the target rate, as policymakers will be quick to make adjustments to monetary policy to prevent inflation from deviating too far from the target rate.

If Policymakers Are Aggressive in Keeping Current Inflation near the Target