The benefits of a credible nominal anchor include ________.

Question

Quizplus · Accepted Answer

A credible nominal anchor helps to anchor inflation expectations, which can help to promote economic stability and reduce uncertainty for businesses and households. This can help to prevent inflationary spirals or deflationary spirals, which can be damaging to an economy. However, a credible nominal anchor may not prevent the real business cycle from occurring or encourage activist policy, and it may limit discretion-based actions by policymakers.

The Benefits of a Credible Nominal Anchor Include ________