ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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both lenders and borrowers have come to expect these levels of inflation.
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this ensures the economy will run at full employment.
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it is high enough to avoid the problems of deflation, but low enough to avoid most problems associated with inflation.
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it is ideal to have expected inflation equal unexpected inflation.
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Detailed explanation-1: -This is known as the target rate, which is normally set at around 2% to 3%. The principle of inflation targeting is based on the belief that long-term economic growth is best achieved by maintaining price stability, and price stability is achieved by controlling inflation.
Detailed explanation-2: -The Federal Open Market Committee (FOMC) judges that inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures, is most consistent with the Federal Reserve’s mandate for maximum employment and price stability.
Detailed explanation-3: -Because inflation is a general increase in prices, lots of prices rising by a large amount, all at the same time. And that’s important because if lots and lots of prices are rising, that’s telling you that there’s an imbalance in the overall economy and that’s something that policymakers need to address.
Detailed explanation-4: -The Monetary Policy Framework On March 31, 2021, the Central Government retained the inflation target and the tolerance band for the next 5-year period – April 1, 2021 to March 31, 2026.