ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The BSP’s primary mandate
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Refers to low and stable inflation
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Preserves purchasing power
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All of the above
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Detailed explanation-1: -Price stability is the condition in which the domestic currency retains its purchasing power by maintaining low and stable inflation as measured by the Consumer Price Index over the medium term (from 3 to 5 years). Price stability does not imply that prices do not change; it means that prices grow at a moderate pace.
Detailed explanation-2: -Price stability calculation varies by region. In the United States, for example, the metric used is the Consumer Price Index (CPI). Europe uses a similar metric known as the Harmonized Index of Consumer Prices (HICP).
Detailed explanation-3: -Price stability refers to an inflation rate low and stable enough that it would not influence the decision-making processes of economic agents. It is instrumental in growth and employment-the long-term targets of monetary policy.
Detailed explanation-4: -The objective of price stability refers to the general level of prices in the economy and implies avoiding both prolonged inflation and deflation.