The Fed will keep the inflation rate constant,regardless of evolving economic conditions,if it is using:
A) Friedman's monetary rule.
B) inflation targeting.
C) monetary targeting.
D) the Taylor rule.

Question

Quizplus · Accepted Answer

Inflation targeting is a monetary policy strategy in which the central bank sets a specific target for the inflation rate and uses policy tools to achieve that target. This means that regardless of evolving economic conditions, the Fed will keep the inflation rate constant at the target level. Therefore, option B is the best choice. Friedman's monetary rule suggests that the central bank should increase money supply at a constant rate that equals the long-run growth rate of the economy, which may lead to changes in the inflation rate depending on economic conditions. Monetary targeting focuses on controlling the money supply, while the Taylor rule suggests adjusting interest rates based on the difference between actual inflation rates and the target inflation rate. None of these options are as focused on keeping inflation rate constant as inflation targeting.

The Fed Will Keep the Inflation Rate Constant,regardless of Evolving