Which of the following best describes the primary goal of governments and central banks in maintaining an inflation target?
Understand the Problem
The question is asking about the primary goal of governments and central banks in maintaining an inflation target. It aims to test your understanding of monetary policy and its objectives, especially concerning price stability and deflation.
Answer
The primary goal is to achieve price stability by keeping inflation low and stable.
The primary goal of governments and central banks in maintaining an inflation target is to achieve price stability, which involves keeping inflation low and stable over the long term.
Answer for screen readers
The primary goal of governments and central banks in maintaining an inflation target is to achieve price stability, which involves keeping inflation low and stable over the long term.
More Information
Maintaining an inflation target is crucial for economic stability and helps to foster confidence in the currency and overall economy.
Tips
A common mistake is thinking the goal is to eliminate inflation entirely; instead, the aim is to keep it at a low, stable, and predictable level.
Sources
- Monetary Policy and Central Banking - imf.org
- What Is Inflation Targeting, and How Does It Work? - Investopedia - investopedia.com
- What Central Banks Do - Investopedia - investopedia.com
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