Inflation targeting is one policy that attempts to deal with the problem of:
A)dollarization.
B)time inconsistency.
C)the tradeoff between inflation and unemployment.
D)the liquidity trap.
E)none of the above.

Question

Quizplus · Accepted Answer

Inflation targeting is a monetary policy strategy that aims to achieve a desired level of inflation by using interest rate adjustments and other monetary tools. Its main objective is to provide a clear and transparent policy framework that helps to anchor inflation expectations and avoid the problem of time inconsistency, which occurs when policymakers make decisions that are not consistent with their original intentions. Inflation targeting is not directly related to dollarization, the tradeoff between inflation and unemployment, or the liquidity trap.

Inflation Targeting Is One Policy That Attempts to Deal with the Problem