If people have rational expectations a monetary policy contraction that is annou

Question - If people have rational expectations a monetary policy contraction that is announced and is credible could ?

Options:

A . reduce inflation with little or no increase in unemployment

B . Increase inflation but would decrease unemployment by an unusually large amount

C . increase inflation with little or no decrease in unemployment

D . reduce inflation but it would increase unemployment by an unusually large amount

Answer: Option A
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