Chapter 36, Problem 2CYU

To determine

The debates that have the modern consensus not resolved

Explanation of Solution

There are certain problems that need to be addressed through debate, including:

1. Whether the Fed should set an inflation objective or not as the inflation objective can support to estimate the expected level of inflation and what would be considered on priority while controlling the inflation in economy.
2. Whether it should use monetary policy to control asset price bubbles as price can be considered asset while dealing with bonds, stocks, or real estates in the economy.
3. And, what kind of policy, if any, unconventional monetary policy it needs to deploy in the event of a liquidity trap as due to a bleak economic outlook, investors would prefer to hold cash rather than higher-yielding investments.

These all are debates where modern agreements or consensus have not been reached on any of these issues.

Economics Concept Introduction

Introduction: Inflation refers to the problem of increase in price of goods and services in the economy which affects the consumption level of the people in country. And, monetary policy is used to control the supply of money in an economy to achieve the targeted economic growth.