If a monetary authority uses inflation targeting of 1% to 2% per year, deflation calls for:
A) contractionary monetary policy.
B) no change to monetary policy.
C) quantitative easing.
D) a balanced budget.

Question

Quizplus · Accepted Answer

Deflation indicates falling prices, which can harm economic growth. To counteract deflation, a monetary authority might use quantitative easing to increase money supply and stimulate demand, aiming to reach the inflation target.

If a Monetary Authority Uses Inflation Targeting of 1% to 2