Please classify each of the statements about inflation targeting as true or false. Inflation targeting usually requires that central banks do not prioritize concerns about unemployment. The use of strict inflation targets generally give central banks greater autonomy regarding what decisions to make. Most inflation targets are ranges rather than an exact level that central banks must meet. Advocates of inflation targeting argue that it will increase the need for an active monetary policy. Answer Bank

Inflation targeting usually requires that central banks do not prioritize concerns about unemployment. - True

There is a trade-off, in the short-term, between inflation and unemployment. If a central bank prioritizes keeping inflation low, that is to say, inflation targeting, then, it cannot prioritize keeping unemployment as low as possible at the same time.

The use of strict inflation targets generally give central banks greater autonomy regarding what decisions to make. - False

Very strict inflation targets actually reduce the amount of options that a central bank can take, and the amount of decisions it can make, because all the actions of the central bank must be channeled towards a very specific objective which is keeping inflation under a strict target.

Most inflation targets are ranges rather than an exact level that central banks must meet. - True

Central banks do not control inflation directly, they do so through indirect tools like open market operations, discount window rates, and other interbank rates. This results in inflation targets that are ranges rather than exact numbers.

Advocates of inflation targeting argue that it will increase the need for an active monetary policy.  - False

Inflation targeting is a policy that promotes passive action from central banks. Central banks are kept to a more or less secondary role under normal economic conditions.

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