Fed monetary policy could have an impact on the economy

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Reference no: EM131388310

Why did Volcker's disinflation set a precedent that Fed chairs that came after him were able to benefit from?

Because he showed that the Fed's monetary policy could have an impact on the economy.

Because he set a precedent that showed that the Fed cared more about employment than inflation.

Because his willingness to inflict a prolonged slump in the economy to lower inflation set a credible threat that the Fed could do this again. This makes the Fed's announcement of what inflation will be in the future credible.

Because he set a precedent of using adaptive expectations.

Reference no: EM131388310

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