Question

Select all that apply according to mainstream economists, which of the following ideas are important tools for achieving and maintaining full employment, price stability, and economic growth?

O inflation targeting
O a monetary rule
O the taylor rule
O monetary policy

Answer 1

Key tools for achieving economic goals include (1) inflation targeting, (2) a monetary rule, (3) the Taylor Rule, and
(4) overall monetary policy, according to mainstream economists and central bankers who align with the neoclassical economic model.

Step-by-step explanation:

According to mainstream economists, important tools for achieving and maintaining full employment, price stability, and economic growth include inflation targeting, a monetary rule, the Taylor Rule, and monetary policy in general. These tools are seen as integral in managing the level of aggregate demand, keeping inflation at low levels, which is understood to be a favorable condition for a healthy economy. Low inflation allows businesses to concentrate on real economic issues rather than on the uncertainties inflation introduces.

The neoclassical model of economics, which is referenced by central bankers globally, suggests that the economy over the medium to long term is best described by a vertical aggregate supply curve at the level of potential GDP. This model indicates that real economic factors determine potential GDP and the natural rate of unemployment and that monetary policy essentially can only affect inflation levels rather than GDP or unemployment directly.