What is inflation bias? What measures have governments taken to ...

[lracut11]

What is inflation bias? What measures have governments taken to avoid it?
 
  What will be an ideal response?

Question 2

In 1980 the United States announced an embargo on grain exports to the Soviet Union in response to the Soviet invasion of Afghanistan. This embargo was mainly resisted by
 
  A) U.S. grain consumers of bread.
  B) U.S. grain producers.
  C) foreign grain producers.
  D) U.S. communists.
  E) economists concerned with U.S. terms of trade.

[ynlevi]

Answer to Question 1

Inflation bias is caused when a government is expected to use policy tools to create an economic expansion (such as before an election). Because it is expected, wages and therefore prices are increased. If the government did not pursue the expansionary policy then, there would be a recession Inflation is increased without the advantage of an increase in output.
Making the central bank independent of the political government is one answer to avoid inflation bias.

Answer to Question 2

B