_____ occurs when a central bank sets a target inflation rate and adjusts monetary policy to keep inflation in that range.
A) Inflation targeting
B) The Friedman rule
C) The Taylor rule
D) A monetary rule

Question

Quizplus · Accepted Answer

The given statement describes the concept of inflation targeting, where the central bank decides a specific inflation target and makes necessary adjustments to monetary policy to maintain inflation within that range. Choice B, the Friedman rule, refers to a monetary policy of setting the nominal interest rate at zero, while the Taylor rule (Choice C) suggests a guideline for adjusting the interest rates based on inflation and output gap. Choice D, a monetary rule, refers to a fixed set of guidelines for the central bank's monetary policy, which may or may not include inflation targeting.

_____ Occurs When a Central Bank Sets a Target Inflation