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Expansionary Monetary Policy Effects
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When a central bank adopts inflation targeting, what is the primary goal of this monetary policy approach?

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A

To stabilize prices by maintaining a specific inflation rate

B

To increase employment regardless of inflation levels

C

To control interest rates without regard to inflation

D

To maximize government spending in the economy

Understanding the Answer

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Inflation targeting is about keeping prices steady. Other options are incorrect because The misconception is that the aim is only to raise jobs; This option mixes up tools with goals.

Key Concepts

Inflation Targeting
Topic

Expansionary Monetary Policy Effects

Difficulty

easy level question

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Definition
Definition

Expansionary monetary policy involves the central bank reducing interest rates to stimulate aggregate demand, leading to increased output and decreased unemployment. This policy aims to address cyclical unemployment and boost real income in the short run.

Topic Definition

Expansionary monetary policy involves the central bank reducing interest rates to stimulate aggregate demand, leading to increased output and decreased unemployment. This policy aims to address cyclical unemployment and boost real income in the short run.

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