Inflation Targeting Requires That the Central Bank

question 4

Multiple Choice

Inflation targeting requires that the central bank

• A) publicise its targeted inflation rate.
• B) adopt a k-percent rule for the inflation rate.
• C) avoid changing the amount of the monetary base.
• D) set a fixed price for real assets.
• E) use a short-term interest rate as its policy instrument.

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Definitions:

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved.

Society's Welfare

The overall well-being and quality of life of the people within a society, including factors like health, happiness, and economic prosperity.

Socially Efficient

A market condition where resources are allocated in a way that maximizes the overall benefit to society.

Monopolist's Supply

The quantity of goods or services a monopolist chooses to produce and sell, influenced by its market power to set prices.