Jefferson Argues Against Raising Fed's 2% Inflation Goal

The video discusses the Federal Reserve's dual mandate of promoting maximum employment and stable prices. It highlights the risks of monetary policy being either too restrictive or not restrictive enough to achieve the 2% inflation target. The debate over raising the inflation target is examined, with concerns about reputational costs and the potential benefits of alternative strategies like supervisory policies. The video concludes by questioning the stability of prices with higher inflation targets.

What is the dual mandate of monetary policy discussed in the video?

• Promoting international trade and investment

• Reducing taxes and increasing government spending

• Promoting maximum employment and stable prices

• Increasing interest rates and reducing inflation

What is one potential risk of changing the FOMC's long-term inflation objective?

• It might cause a decrease in international trade

• It could undermine the credibility of the FOMC

• It might increase government debt

• It could lead to higher unemployment rates

Why might a higher inflation target be considered problematic?

• It might increase the value of the currency

• It might stretch the meaning of stable prices

• It could reduce employment opportunities

• It could lead to deflation

What alternative strategy is suggested instead of increasing the inflation target?

• Increasing interest rates

• Relying on supervisory and macroprudential policies

• Promoting international trade agreements

• Reducing government spending

What is the purpose of a higher inflation target according to the video?

• To promote international trade

• To reduce the national debt

• To increase the ability of the Central Bank to deal with severe recessions

• To increase employment rates