Question

Which of the following is true of a central bank that employs inflation targeting? A target rate of annual inflation is maintained by increasing or decreasing tax revenues. A target rate of employment is maintained by expanding or contracting the money supply. A target rate of annual inflation is maintained by hiring or firing federal employees. A target rate of annual inflation is maintained by expanding or contracting the money supply.

Answer 1

Answer:

A target rate of annual inflation is maintained by expanding or contracting the money supply.

Explanation:

Inflation targeting may be defined as the monetary policy of the central bank which follows a very explicit goal for the medium term and it announces the inflation target to the general public. According to the economist, the economy would perform better if there is inflation and the price rises. For maintaining the economic growth of a country, inflation or the rise in prices is necessary.

It is done by the Central bank by managing the monetary supply in the market and also maintaining the interest rates in the market. The inflation targeting is considered as the antidote for the stop go money policy of the past.