A columnist in the Wall Street Journal has argued in favor of changing the Fed’s dual mandate to a single mandate of price stability: “When an economy gets weak enough, extraordinary easing measures can be justified as the necessary battle against potentially highly damaging deflation rather than to reduce unemployment.”
a. What does the columnist mean by “extraordinary easing measures”?
b. How would these measures end deflation? Why would deflation be “potentially highly damaging”?
c. Briefly explain whether you agree with the columnist’s argument that the Fed’s dual mandate should be replaced with a single mandate of price stability.