Permanent declines in inflation such as those seen in Chile and Sweden must have been a result of:
A)An increase in the central bank's inflation target
B)A decrease in the central bank's inflation target
C)Less independence for their central banks
D)A change to targeting interest rates instead of inflation rates

Question

Quizplus · Accepted Answer

A decrease in the central bank's inflation target would lead to lower inflation over the long term as it signals a stronger commitment to price stability. This is the most likely explanation for permanent declines in inflation seen in Chile and Sweden. The other choices are not directly associated with sustained reductions in inflation.

Permanent Declines in Inflation Such as Those Seen in Chile