Which of the following is a disadvantage of inflation targeting?
A)It reduces the flexibility of the central bank.
B)It makes the goals of the central bank explicit.
C)It leads to the problem of time inconsistency.
D)It raises the expected inflation rate.

Question

Which of the following is a disadvantage of inflation targeting?​
A)​It reduces the flexibility of the central bank.
B)​It makes the goals of the central bank explicit.
C)​It leads to the problem of time inconsistency.
D)​It raises the expected inflation rate.

Quizplus · Accepted Answer

Inflation targeting can reduce the flexibility of the central bank because it commits the bank to a specific inflation rate, potentially limiting its ability to respond to unforeseen economic changes.

Which of the Following Is a Disadvantage of Inflation Targeting?​

Which of the Following Is a Disadvantage of Inflation Targeting?