Inflation targeting has the following advantages EXCEPT FOR ________. A. increased monetary policy transparency B. reduction of the time-inconsistency problem C. immediate signal on the achievement of the target D. consistency with democratic principles
Question
Inflation targeting has the following advantages EXCEPT FOR ________. A. increased monetary policy transparency B. reduction of the time-inconsistency problem C. immediate signal on the achievement of the target D. consistency with democratic principles
Solution
The correct answer is C. "Immediate signal on the achievement of the target". Inflation targeting does not provide an immediate signal on the achievement of the target. It takes time to see the effects of monetary policy on the economy, and therefore, it takes time to know whether the inflation target has been achieved.
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