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In 2012, the Federal Reserve joined many other central banks by making explicit a numerical target for inflation. Explain how stating that an annual inflation rate of 2 percent over the long run is most consistent with its mandate can help the Federal Reserve fulfill that mandate. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. 2 Announcing a target raises the cost of reneging on the commitment, making the policy time consistent 1 The Fed statement on inflation expectations helps anchor inflationary expectations. 2 Announcing a target indicates the independence of the Fed. 1 Inflation expectations inform firms' pricing and wage decisions, therefore firm decisions support the inflation target. The Fed statement indicates the political leaders are supportive of the policy. ? A credible central bank rarely keeps inflation near its target. In 2012, the Federal Reserve joined many other central banks by making explicit a numerical target for inflation. Explain how stating that an annual inflation rate of 2 percent over the long run is most consistent with its mandate can help the Federal Reserve fulfill that mandate. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. 2 Announcing a target raises the cost of reneging on the commitment, making the policy time consistent 1 The Fed statement on inflation expectations helps anchor inflationary expectations. 2 Announcing a target indicates the independence of the Fed. 1 Inflation expectations inform firms' pricing and wage decisions, therefore firm decisions support the inflation target. The Fed statement indicates the political leaders are supportive of the policy. ? A credible central bank rarely keeps inflation near its target