The slope of the monetary policy reaction curve is determined by:
A)How strongly the economy reacts to changes in the nominal interest rate
B)How strongly the inflation rate impacts peoples' decisions
C)How aggressively policymakers change interest rates in response to deviations between current and target inflation rates
D)People's expectations for inflation

Question

Quizplus · Accepted Answer

The slope of the monetary policy reaction curve is determined by how aggressively policymakers change interest rates in response to deviations between current and target inflation rates. This means that the steeper the slope, the more quickly and aggressively central banks respond to inflation deviations by adjusting interest rates.

The Slope of the Monetary Policy Reaction Curve Is Determined