Most modern central banks engage in inflation targeting instead of aiming at some nominal level of GDP, some exchange rate level, or the unemployment rate. Most central banks choose a rate of between 2-3% annual inflation and periodically adjust interest rates via open market operations and discount rate changes.
Most modern central banks engage in inflation targeting instead of aiming at some nominal level of GDP, some exchange rate level, or the unemployment rate. Most central banks choose a rate of between 2-3% annual inflation and periodically adjust interest rates via open market operations and discount rate changes.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter22: Inflation
Section: Chapter Questions
Problem 34P: The total price of purchasing a basket of goods in the United Kingdom over four years is: year...
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![Most modern central banks engage in inflation
targeting instead of aiming at some nominal level of
GDP, some exchange rate level, or the
unemployment rate. Most central banks choose a
rate of between 2-3% annual inflation and periodically
adjust interest rates via open market operations and
discount rate changes.
A question, however, is whether they should focus
on targeting core inflation, which excludes food and
energy and a few other very volatile items, or use a
headline inflation rate that includes all items in a
defined consumer basket of goods. The majority of
central banks focus on core inflation.
1. Can you name a few reasons why overreliance on
core inflation can be misleading?
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb8935b16-5928-4bf2-9199-70f712e553ef%2F8ba420e3-d68a-4115-991a-d51e5e56cc82%2F08b045_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Most modern central banks engage in inflation
targeting instead of aiming at some nominal level of
GDP, some exchange rate level, or the
unemployment rate. Most central banks choose a
rate of between 2-3% annual inflation and periodically
adjust interest rates via open market operations and
discount rate changes.
A question, however, is whether they should focus
on targeting core inflation, which excludes food and
energy and a few other very volatile items, or use a
headline inflation rate that includes all items in a
defined consumer basket of goods. The majority of
central banks focus on core inflation.
1. Can you name a few reasons why overreliance on
core inflation can be misleading?
0
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