Why does the Federal Reserve target inflation rather than unemployment?
A)The inflation rate is directly related to monetary policy and is thus an easier target to maintain.
B)The Fed cares more about inflation than about unemployment.
C)If inflation is kept low, this automatically keeps the economy at maximum sustainable employment levels.
D)The public will not see the Fed as credible if it targets the unemployment rate.

Question

Quizplus · Accepted Answer

The Federal Reserve targets inflation rather than unemployment because the inflation rate is directly related to monetary policy and is thus an easier target to maintain. They can control inflation by adjusting interest rates, but unemployment is affected by a variety of factors beyond their control.

Why Does the Federal Reserve Target Inflation Rather Than Unemployment