Why the wage contracts have short durations

Reference no: EM13199563

Suppose the Federal Reserve announced that it would pursue contractionary monetary policy to reduce the inflation rate. Would the following conditions 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: EM13199563

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