Inflation targeting:
A) explicitly considers the long-run goal of price stability for monetary policy.
B) states that the long-run goal of monetary policy is an output target.
C) explicitly considers the short-run goal of price stability for monetary policy.
D) puts equal weight on price stability and an output target for monetary policy.

Question

Quizplus · Accepted Answer

Inflation targeting explicitly considers the long-run goal of price stability for monetary policy, as it aims to maintain low and stable inflation over a longer period of time. This is in contrast to an output target, which focuses on achieving a specific level of economic growth or employment in the short run. Option B is incorrect because inflation targeting does not prioritize an output target as the long-run goal of monetary policy. Option C is partially correct, as inflation targeting also considers the short-run goal of price stability, but this is not the primary focus. Option D is incorrect as inflation targeting prioritizes price stability over an output target.

Inflation Targeting