Which of the Following Is Not a Disadvantage of Inflation

question 21

Multiple Choice

Which of the following is not a disadvantage of inflation targeting?

• A)If the U.S. inflation rate deviates substantially from the Fed's target inflation rate, the Fed could lose credibility.
• B)The Fed's complete focus on inflation could result in a much higher unemployment level.
• C)The Fed's complete focus on inflation could result in much higher interest rates, which would discourage economic growth.
• D)All of the above are disadvantages of inflation targeting.

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Definitions:

Present Value

The modern equivalent value of a future monetary sum or cash flow sequence, with an established return rate.

Interest Rate

The percentage charged on a loan or paid on deposited funds, representing the cost of borrowing or the gain on savings.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth.

Present Value

The current valuation of a future financial sum or stream of payments, factoring in a set rate of return.