The heads of central banks are typically very conservative about inflation because:
A) they can influence expectations of inflation and those, in turn, influence actual behavior.
B) they can influence rational expectations and those, in turn, influence irrational expectations.
C) they can influence the budget deficit and, in turn, promote hyperinflation.
D) they can influence expectations of government spending and those, in turn, influence nominal wages.

Question

Quizplus · Accepted Answer

The heads of central banks are typically very conservative about inflation because they can influence expectations of inflation and those, in turn, influence actual behavior. Public perception of inflation can drive consumer behavior and even impact the decisions of firms with regard to investments and pricing. Therefore, central bankers focus on maintaining low and stable inflation expectations to encourage stable economic growth.

The Heads of Central Banks Are Typically Very Conservative About