How might inflation targeting improve the Fed's monetary policy? ...

[future617RT]

How might inflation targeting improve the Fed's monetary policy?
 
  What will be an ideal response?

Question 2

Which of the following statements about a circular flow model is false?
 
  A) Producers are buyers in the factor market and sellers in the product market.
  B) Households are neither buyers nor sellers in the input market.
  C) Households are buyers in the product market.
  D) Producers are buyers in the factor market.

[31809pancho]

Answer to Question 1

Inflation targeting, under which the Fed would make public its inflation target and face penalties if the target was missed, would improve the Fed's monetary policy because it would remove uncertainty. The public would know what the Fed's policy was and would not need to guess at what the inflation rate would be the future. This certainty would improve people's decision making about saving and investment and thereby improve economic performance.

Answer to Question 2

B