The Problems of Raising the Level of the Inflation Target

question 66

Multiple Choice

The problems of raising the level of the inflation target include

• A)if the zero-lower-bound problem is rare,then the benefits of a higher inflation target are not very large.
• B)the costs of higher inflation in terms of the distortions it produces in the economy are high.
• C)it is more difficult to stabilize the inflation rate at a higher targeting level.
• D)all of the above.

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Definitions:

Area

In a geographical or economic context, can refer to a specified region or domain under consideration for its characteristics or resources.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Gardenburger

Typically refers to a brand or type of vegetarian burger made from garden vegetables, often used as a meat substitute.

Beer

An alcoholic beverage made from the fermentation of malted barley and other cereals, flavored with hops.