Proponents of inﬂation targeting generally think that
A) the economy will have fewer, shorter, and less severe business cycles if the Fed holds the rate of inﬂation to low, targeted levels from year to year.
B) low interest rates are inﬂationary and high interest rates are deﬂationary.
C) ﬁscal policy is more effective in stabilizing the economy than monetary policy.
D) the Fed should strive to achieve zero inﬂation.

Question

Quizplus · Accepted Answer

Proponents of inﬂation targeting believe that holding the rate of inﬂation to low, targeted levels can lead to fewer, shorter, and less severe business cycles. This is achieved through the use of monetary policy tools such as adjusting interest rates to control the money supply and, ultimately, the level of inﬂation. They do not believe that fiscal policy is more effective in stabilizing the economy and do not necessarily advocate for achieving zero inﬂation.

Proponents of Inﬂation Targeting Generally Think That