Price level stability
A) is the most important tool of the Federal Reserve.
B) is thought by most economists to be reached with a measured inflation rate of between 0 and 2 percent a year.
C) has no relationship to growth in potential GDP.
D) was attained by the Fed for the period between 1979 and 2001.

Question

Quizplus · Accepted Answer

Price level stability is a key goal of monetary policy, and most economists believe that a low and stable inflation rate of around 0-2% per year is consistent with achieving this goal. While price level stability is not directly related to growth in potential GDP, it is important for promoting sustainable economic growth over the long term. The Fed has been successful in achieving price level stability for a significant period between 1979 and 2001.

Price Level Stability