If all the assumptions underpinning the policy irrelevance proposition are in place, fully anticipated monetary policy will:____.

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02-08-2022
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If all the assumptions underpinning the policy irrelevance proposition are in place, fully anticipated monetary policy will:____.

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smecloudbird17 smecloudbird17 · Answer 1 · 2022-08-15T19:04:45+02:00

If all the assumptions underpinning the Policy Irrelevance Proposition are in place, fully anticipated monetary policy will reduce inflation without any output or employment cost.

An important implication of the Policy Irrelevance Proposition is that the monetary authorities can reduce inflation without any output or employment cost. Thus, this policy is enacted by the central bank that involves the management of money supply and interest rates.

The goals of monetary policy are to promote maximum employment, moderate long-term interest rates, and stable prices. Thus, by implementing effective monetary policy all this could take place.

Hence, the answer is given and explained above.

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