The Benefit of Adopting an Inflation-Control Target I

question 10

Multiple Choice

The benefit of adopting an inflation-control target i.is that the Reserve Bank's policy actions are clearly understood in financial markets.
Ii) is that it provides an anchor for future expectations of inflation.
Iii) is that Reserve Bank policy actions are hidden from financial markets.

• A)i and ii
• B)iii only
• C)i only
• D)ii only
• E)None of the above answers is correct.

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Definitions:

Four-firm Concentration Ratio

A measure that expresses the total market share held by the four largest firms within an industry.

Herfindahl Index

A calculation of how concentrated a market is, achieved by adding together the market share squares of every firm within that industry.

Market Power

The ability of a company or group of companies to manipulate prices or market conditions in their favor, often due to a lack of significant competition.

Oligopoly

A market structure dominated by a small number of large firms, leading to limited competition and potentially higher prices.