Which of the following statements about inflation targeting is true?
A)Inflation targeting by the central banks in other countries has not typically lowered inflation.
B)Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals.
C)Inflation targeting would not allow the central bank the flexibility to take action against a severe recession.
D)Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation,improving their planning and the efficiency of the economy.

Question

Quizplus · Accepted Answer

Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation, improving their planning and the efficiency of the economy. Option A is incorrect as evidence suggests that inflation targeting has been successful in reducing inflation in other countries. Option B is incorrect as inflation targeting allows the central bank to be more transparent and accountable in achieving its target. Option C is incorrect as inflation targeting would provide the central bank with enough flexibility to adjust its policy to address severe recessions.

Which of the Following Statements About Inflation Targeting Is True