Central banks claim to provide stable currencies. They also claim that for fear of deflation, they aim at annual inflation rates not of 0%, but of 2%. Despite this compromise, how is the claim of providing stable currencies to be evaluated in the light of a 7% annual inflation rate? O Only the best and the brightest lead the world's central banks, so whatever they claim will most likely be true. O The problem is that central banks are private institutions, so unlike government agencies, they might just lie. A 7% annual inflation rate, if not reigned in, will approximately halve a currency's purchasing power within ten years, which casts the claim into some doubt. O 7% are just five percentage points above 2%, so it's not really a problem.
Central banks claim to provide stable currencies. They also claim that for fear of deflation, they aim at annual inflation rates not of 0%, but of 2%. Despite this compromise, how is the claim of providing stable currencies to be evaluated in the light of a 7% annual inflation rate? O Only the best and the brightest lead the world's central banks, so whatever they claim will most likely be true. O The problem is that central banks are private institutions, so unlike government agencies, they might just lie. A 7% annual inflation rate, if not reigned in, will approximately halve a currency's purchasing power within ten years, which casts the claim into some doubt. O 7% are just five percentage points above 2%, so it's not really a problem.
Chapter1: Making Economics Decisions
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Transcribed Image Text:Pregunta 3
Central banks claim to provide stable currencies. They also claim that for fear of deflation, they aim at annual
inflation rates not of 0%, but of 2%. Despite this compromise, how is the claim of providing stable currencies to be
evaluated in the light of a 7% annual inflation rate?
O Only the best and the brightest lead the world's central banks, so whatever they claim will most likely be true.
O The problem is that central banks are private institutions, so unlike government agencies, they might just lie.
A 7% annual inflation rate, if not reigned in, will approximately halve a currency's purchasing power within ten years, which
casts the claim into some doubt.
O 7% are just five percentage points above 2%, so it's not really a problem.
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