Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 24: Q. 19 (page 655)

How can monetary authorities target any inflation rate they wish?

Short Answer

Expert verified

Using autonomous monetary policy easing and tightening, monetary policymakers can target any inflation rate.

Step by step solution

01

Step 1. Introduction

Inflation is defined as a steady increase in the prices of goods and services in a given economy over a given period of time.

02

Step 2. Explanation

By implementing autonomous monetary policy easing and tightening, monetary policymakers can target any inflation rate. The former is used to target high inflation, whereas the latter is used to aim lower inflation. The autonomous easing of monetary policy represents an increase in the money supply, whereas the autonomous tightening of monetary policy depicts a decrease in the money supply in the economy.

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

Go to the St. Louis Federal Reserve FRED database, and find data on the personal consumption expenditure price index (PCECTPI), the unemployment rate (UNRATE), and an estimate of the natural rate of unemployment (NROU). For the price index, adjust the units setting to "Percent Change From Year Ago." For the unemployment rate, adjust the frequency setting to "Quarterly." Select the data from 2000through the most current data available, download the data, and plot all three variables on the same graph. Using your graph, identify periods of demand-pull or costpush movements in the inflation rate. Briefly explain your reasoning.

The fact that it takes a long time for firms to get new plants and equipment up and running is an illustration of what policy problem?

What does it mean when we say that the inflation gap is negative?

Many developing countries suffer from endemic corruption. How does this help explain why these countries’ economies typically have high inflation and economic stagnation? Use a graph of aggregate demand and supply to demonstrate.

Why does the divine coincidence simplify the job of policymakers?
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