T reduce inflation the fed must use selector 1

Question

To reduce inflation, the Fed must use selector 1

• expansionary
• contractionary

policy. In the short run, the economy moves from point A to point selector 2

• C
• B

. In the long run, the economy will move to point selector 3

• C
• A
• B

. This illustrates that the costs of reducing inflation are selector 4

• permanent
• temporary

and the benefits of reducing inflation are selector 5

• permanent
• temporary