Discuss monetary policy to reduce the inflation rate

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Reference no: EM131733002

Suppose the Federal Reserve announced that it would pursue contractionary monetary policy to reduce the inflation rate. Choose one of the following conditions and describe whether it would make the ensuing recession more or less severe? Explain.

a. Wage contracts have short durations.

b. There is little confidence in the Fed's determination to reduce inflation.

c. Expectations of inflation adjust quickly to actual inflation.

Reference no: EM131733002

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