Fed Officials Worried About Inflation Becoming ‘Entrenched’

Many Fed officials are raising concerns that longer-run inflation expectations could be beginning to drift up to levels inconsistent with the Fed’s goals. The officials stressed that clear and effective communications, along with higher rates are essential in restoring price stability.—axios.com

Answer the following questions to check your understanding of the story.

What happens to the short-run Phillips curve when inflation expectations drift upward?

When inflation expectations drift upward, ______________.

a) a movement occurs up along the short-run Phillips curve

b) a movement occurs down along the short-run Phillips curve

c) the short-run Phillips curve shifts downward

d) the short-run Phillips curve shifts upward

Why does the Fed engage in “clear and effective communications, along with higher rates” to restore price stability?

The Fed wants ______________.

a) the inflation rate to fall and the unemployment rate to increase by moving along the short-run Phillips curve

b) the expected inflation rate to fall and shift the short-run Phillips curve shifts upward

c) the inflation rate and the unemployment rate to fall by moving along the short-run Phillips curve

d) the expected inflation rate to fall and shift the short-run Phillips curve shifts downward

Fed Officials Worried About Inflation Becoming ‘Entrenched’

Like this:

Leave a ReplyCancel reply

Share this:

Like this:

Leave a ReplyCancel reply

Discover more from Econ Eye