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28.2 Inflation Targeting - Coggle Diagram
28.2 Inflation Targeting
Why Target Inflation?
High Inflation Is Costly
- Inflation reduces purchasing power of fixed incomes and creditors; e.g. seniors relying on pension incomes
- high inflation also hampers ability of price system to allocate resources efficiently and produce satisfactory rates of economic growth
- unexpected inflation (periods of high inflation) → uncertainty towards economic growth; i.e. high inflation tends to be volatile → volatility makes it difficult to predict future course of prices e.g. innovating new products/production processes, expanding production facilities, etc.
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