When the link between M1, M2, and inflation broke down in the 1980s, many economists argued that the best policy approach was to have an explicit inflation target. The biggest problem with an explicit inflation target is a.that it requires perfect foresight on the part of the Federal Reserve because of the lagged impact of monetary policy instruments. b.determining which measure of inflation to use. c.that it puts too much emphasis on stable prices over other possible goals for monetary policy. d.determining what that target should be

An explicit inflation targeting means that the Central Bank or the Fed decides a target explicitly…

Answered: When the link between M1, M2, and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When the link between M1, M2, and inflation broke down in the 1980s, many economists argued that the best policy approach was to have an explicit inflation target. The biggest problem with an explicit inflation target is

	a.	that it requires perfect foresight on the part of the Federal Reserve because of the lagged impact of monetary policy instruments.
	b.	determining which measure of inflation to use.
	c.	that it puts too much emphasis on stable prices over other possible goals for monetary policy.
	d.	determining what that target should be

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