The importance of a nominal anchor is to ________.
A) limit the time-inconsistency problem
B) reduce inflation
C) promote low inflation
D) allow discretionary day-to-day monetary policy

Question

Quizplus · Accepted Answer

A nominal anchor is a target for the central bank to keep inflation low and stable. It helps to limit the time-inconsistency problem, which is the tendency for central banks to create inflation in the short run even though it is harmful in the long run.

The Importance of a Nominal Anchor Is to ________