Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 15: Q.37 (page 379)

Is it preferable for central banks to primarily target inflation or unemployment? Why?

Short Answer

Expert verified

Unemployment and inflation, both are primary macroeconomic variables that hold a considerable effect on the economy.

Step by step solution

01

Introduction

Unemployment and inflation, both are primary macroeconomic variables that hold a considerable effect on the economy. The remarkable increase in any of these two can drag a healthy economy to a worse position. Now, this is inconceivable to tell that which one should be the primary target of the Central bank.

02

Explanation

The Short-run Phillips arc shows that there is a balancing between unemployment and inflation. Economists think that small inflation is beneficial for an economy and whole employment is not viable. So, this is anticipated to keep a healthy proportion between these two variables. And in a situation, a Central Bank should act as the circumstances demand.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Define the velocity of the money supply.

What is the basic quantity equation of money?

In a program of deposit insurance as it is operated in the United States, what is being insured and who pays the insurance premiums?

Explain how to use the discount rate to expand the money supply.

The term “moral hazard” describes increases in risky behavior resulting from efforts to make that behavior safer. How does the concept of moral hazard apply to deposit insurance and other bank regulations?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free