Which of the following can lead to expectations of future price stability?
A) The central bank is credible in achieving the inﬂation target.
B) Nominal wages are sticky and adjust slowly.
C) Costs rise in tandem with wages.
D) Commodity, fuel and food prices rise very quickly.

Question

Quizplus · Accepted Answer

A credible central bank in achieving its inflation target can lead to expectations of future price stability because it signals to the market that the central bank is committed to maintaining inflation within a certain range, thereby reducing uncertainty about future inflation rates.

Which of the Following Can Lead to Expectations of Future