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Briefly Explain How Inflation Targeting Works

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Briefly explain how inflation targeting works. When is contractionary policy used? When is expansionary policy used?


Definitions:

Negative Events

Occurrences or situations that are perceived as undesirable, harmful, or unfavorable, often triggering stress or emotional distress.

Pessimism

A tendency to see the worst aspect of things or believe that the worst will happen; a lack of hope or confidence in the future.

Immune System

A complex network of cells, tissues, and organs that work together to defend the body against infections and diseases.

Health Effects

The outcomes or impacts of various factors, including diseases, behaviors, and environmental exposures, on an individual's overall health.

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