The Federal Reserve does have an inflation target and it is currently set at 2%. This target is based on the belief that a moderate level of inflation is necessary for a healthy economy as it encourages spending and investment while preventing deflationary pressures. However, the specific target rate is subject to review and may be adjusted in the future.

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The Federal Reserve

Question 108

Multiple Choice

The Federal Reserve

A) does not have an inflation target; if it did it would likely be 1% or less.
B) does not have an inflation target; if it did it would likely be in the range of 2%.
C) does have an inflation target; it is 1%.
D) does have an inflation target; it is a range from 1-3%.

Correct Answer: