Georgia DECA Advertising Practice Test

The U.S. government's goal to maintain inflation at 2% is referred to as what?

1. Inflation management

2. Inflation targeting

3. Inflation control

4. Inflation stabilization

The correct answer is: Inflation targeting

The U.S. government's goal to maintain inflation at around 2% is known as inflation targeting. This concept involves setting an explicit level of inflation to achieve economic stability and predictability. By focusing on a specific inflation rate, such as 2%, central banks can guide monetary policy decisions, influence interest rates, and provide a framework for public expectations regarding price stability. Inflation targeting helps anchor inflation expectations, allowing businesses and consumers to make better financial decisions based on a clear understanding of the economic landscape. This approach aids in avoiding both excessive inflation and deflation, fostering a stable economic environment conducive to growth. The other options may suggest components or aspects of managing inflation but do not accurately define the specific strategy of setting a target inflation rate, which is central to the concept of inflation targeting.