The tying down of the price level to a nominal variable by the central bank is known as committing to ________.
A)a nominal anchor
B)rational expectations
C)a customs union
D)a positive aggregate demand shock

Question

Quizplus · Accepted Answer

The tying down of the price level to a nominal variable by the central bank is known as committing to a nominal anchor. This is used by central banks to control inflation and stabilize the economy. By committing to a specific nominal anchor, such as a target inflation rate or a fixed exchange rate, the central bank is able to guide the expectations of economic agents and keep prices stable.

The Tying Down of the Price Level to a Nominal