Which of the following statements about inflation targeting is true?
A)Inflation targeting allows the central bank to achieve multiple goals like low unemployment and economic growth.
B)Inflation targeting has not been adopted by the Fed.
C)A central bank that adopts inflation targeting is intrinsically dependent on fiscal policy.
D)Inflation targeting decreases the perceived uncertainty derived from the central bank's course of action.
E)Inflation targeting increases the uncertainty associated with the central bank's course of action.

Question

Quizplus · Accepted Answer

Inflation targeting decreases the perceived uncertainty derived from the central bank's course of action. By communicating a clear target for inflation, the central bank reduces uncertainty about its policy stance and helps anchor expectations for inflation. It does not necessarily allow the central bank to achieve multiple goals like low unemployment and economic growth, nor is it intrinsically dependent on fiscal policy. The Fed has not formally adopted inflation targeting, but it does consider inflation in its policy decisions.

Which of the Following Statements About Inflation Targeting Is True