The Advantage of an Explicit Inflation Target Is That It

question 68

Multiple Choice

The advantage of an explicit inflation target is that it:

• A) helps anchor inflation expectations.
• B) allows banks to set interest rates.
• C) stabilizes employment.
• D) raises the marginal product of capital.
• E) completely eradicates discretionary monetary policy.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, principally involving operating, investing, and financing activities.

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as an income stream for retirees.

Equal Payments

Regularly scheduled payments of the same amount, often used in the repayment of loans.

Installment Note

A debt instrument that requires periodic payments of principal and interest over the term of the loan.