First, discuss why central banks are primarily concerned with achieving price stability as the main goal of
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First, discuss why central banks are primarily concerned with achieving ‘price stability’ as the main goal of monetary policy, rather than other objectives such as reducing unemployment. Then, consider an economy where the Central Bank is pursuing a 2% inflation target. If this economy faces a recession due to sluggish investment and weak demand, how should the Central Bank respond? Would policy makers be concerned if expectations of inflation fell below the inflation target? Explain why.
Related Book For
Macroeconomics
ISBN: 978-1319120054
3rd Canadian edition
Authors: Paul Krugman, Robin Wells, Iris Au, Jack Parkinson
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