Many central banks around the world target an inflation rate of about ________,because of upward bias in measured inflation and to reduce the risk of deflation.
A)-2%.
B)0%.
C)2%.
D)5%.

Question

Quizplus · Accepted Answer

Many central banks target an inflation rate of about 2% because it allows for a small cushion to account for upward bias in measured inflation and reduces the risk of deflation. A 0% inflation target can lead to deflation, which can cause a vicious cycle of declining demand and falling prices, while aiming for a higher inflation rate (such as 5%) can lead to concerns about runaway inflation and reduce the purchasing power of consumers.

Many Central Banks Around the World Target an Inflation Rate