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Which of the following is a disadvantage of inflation targeting?
A) There is simplicity and clarity of the target.
B) Inflation targeting does not rely on a stable money-inflation relationship.
C) There is a delayed signal on the achievement of the target.
D) Inflation targeting reduces the effects of inflation shocks.
Answer: C
Diff: 1 Type: MC Page Ref: 446
Skill: Recall
Objective List: 18.2 List the advantages and disadvantages of inflation targeting
Which of the following is a disadvantage of inflation targeting?
A) There is simplicity and clarity of the target.
B) Inflation targeting does not rely on a stable money-inflation relationship.
C) It imposes a rigid rule.
D) Inflation targeting reduces the effects of inflation shocks.
Answer: C
Diff: 1 Type: MC Page Ref: 447
Skill: Recall
Objective List: 18.2 List the advantages and disadvantages of inflation targeting
Which of the following is disadvantage of inflation targeting?
A) There is simplicity and clarity of the target.
B) Inflation targeting does not rely on a stable money-inflation relationship.
C) It may lead to larger output fluctuations.
D) Inflation targeting reduces the effects of inflation shocks.
Answer: C
Diff: 1 Type: MC Page Ref: 447
Skill: Recall
Objective List: 18.2 List the advantages and disadvantages of inflation targeting
Inflation targeting has the potential to reduce the likelihood that the central bank will fall
into the time-inconsistency trap of trying to ____ output and employment in the short run by
pursuing overly ____ monetary policy.
A) lower; tight
B) expand; expansionary
C) lower; expansionary
D) expand; tight
Answer: B
Diff: 2 Type: MC Page Ref: 444
Skill: Recall
Objective List: 18.2 List the advantages and disadvantages of inflation targeting