Which of the following is not true with respect to inflation targeting?
A) The Fed could lose credibility if the inflation rate deviates substantially from the Fed's target inflation rate.
B) A focus on inflation could result in a much higher unemployment rate.
C) Inflation targeting may not only satisfy the inflation goal, but could also achieve the employment stabilization goal in the long run.
D) If unemployment is slightly higher than normal, while inflation is at the peak of the target range, an inflation targeting approach would like advocate a loose monetary policy.

Question

Quizplus · Accepted Answer

An inflation targeting approach would typically advocate a tighter monetary policy if inflation is at the peak of the target range, even if unemployment is slightly higher than normal, to ensure inflation remains controlled.

Which of the Following Is Not True with Respect to Inflation