Unlike a Monetarist Policy Rule, an Inflation Target Has the Advantage

question 69

Multiple Choice

Unlike a monetarist policy rule, an inflation target has the advantage of:

• A) eliminating the need to announce the policy target.
• B) providing a real target rather than a nominal one.
• C) allowing the central bank unlimited discretion.
• D) insulating the economy from changes in money velocity.

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Definitions:

Unsystematic Risk

The risk associated with a specific company or industry that can be mitigated through diversification.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk or un-diversifiable risk.

Risk Premium

The additional return required by investors for taking a higher level of risk, compared to a safer investment.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, visible in GDP, real income, employment, industrial production, and wholesale-retail sales.