Inflation targeting is a monetary policy rule that requires the central bank to adjust _____ in order to attain the desired inflation rate.
A) a price index
B) the velocity of money
C) nominal GDP
D) the interest rate

Question

Quizplus · Accepted Answer

Inflation targeting requires the central bank to adjust the interest rate in order to attain the desired inflation rate. When inflation is above the target range, the central bank will increase interest rates to reduce spending and slow down the economy. Conversely, when inflation is below the target range, the central bank will lower interest rates to stimulate spending and boost economic growth. This is considered a highly effective tool for controlling inflation and maintaining price stability in the economy.

Inflation Targeting Is a Monetary Policy Rule That Requires the Central