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.

Question

Quizplus · Accepted Answer

Inflation targeting imposes a rigid rule, which can limit the flexibility of central banks to respond to changing economic circumstances. This may be a disadvantage in situations where other economic goals, such as employment or output growth, are also important.

Which of the Following Is a Disadvantage of Inflation Targeting