One requirement for an effective nominal anchor is ________.
A)price stability
B)credibility
C)fixed exchange rates
D)rational expectations

Question

Quizplus · Accepted Answer

Credibility is the most important requirement for an effective nominal anchor. Credibility ensures that market participants believe that the central bank is committed to achieving its targets, which helps anchor expectations and keep inflation low and stable. Price stability, fixed exchange rates, and rational expectations can all contribute to an effective nominal anchor, but they are not as important as credibility.

One Requirement for an Effective Nominal Anchor Is ________