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.

Question

Quizplus · Accepted Answer

Inflation targeting may lead to larger output fluctuations as central banks may be too focused on meeting the inflation target at the expense of other macroeconomic objectives such as economic growth or employment.

Which of the Following Is Disadvantage of Inflation Targeting