An argument in favour of the Reserve Bank of Australia (RBA)adopting inflation targeting is that in the long run, the RBA can have an impact on inflation but not on real GDP.

Question

Quizplus · Accepted Answer

Inflation targeting is a monetary policy framework under which a central bank sets a specific inflation rate as its target and uses its policy tools to achieve that target over the medium term. In the long run, the RBA can have some control over inflation through its policy decisions, but it cannot directly control real GDP, which is influenced by various factors such as technology, demographics, and productivity. Therefore, the argument in favour of the RBA adopting inflation targeting is true.

An Argument in Favour of the Reserve Bank of Australia