Which of the following is NOT a disadvantage of inflation targeting?
A)If the U.S. inflation rate deviates substantially from the Fed's target inflation rate, the Fed could lose credibility.
B)The Fed's focus on inflation could result in a much higher unemployment level.
C)The Fed's focus on inflation will likely lead to a higher government budget deficit.
D)All of these are disadvantages of inflation targeting.

Question

Quizplus · Accepted Answer

Inflation targeting primarily focuses on stabilizing prices and does not directly lead to higher government budget deficits. Budget deficits are more directly influenced by fiscal policy decisions, such as government spending and taxation levels, rather than the central bank's monetary policy focus on inflation.

Which of the Following Is NOT a Disadvantage of Inflation