Monetary Policy - Monetary Policy and Aggregate demand - inflation targeting
8 important questions on Monetary Policy - Monetary Policy and Aggregate demand - inflation targeting
What do we call it when the central bank announces the inflation rate it is trying to achieve? And what is it used for?
set policy in attempt to hit that target
What is inflation targeting based on?
What are the two advantages to inflation targeting?
- Transparency
- accountability
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How does accountability make infaltion targetting a good policy?
What are the disadvantages of inflation targeting?
What must the central bank do to achieve inflation target?
which in turn influences market interest rate (loan rate) and exchange rates
shifts the AD curve
How long does monetary policy take to work?
What happens to the to future inflation (target) When the demand is too strong?
pushing the economy against it limits
there is risk of future inflation moving above the percentage target
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