Why did the Full Employment and Balanced Growth Act establish 3 percent inflation as the benchmark rather than zero inflation?
What will be an ideal response?
The goal was set at 3 percent because of unemployment concerns and to allow for quality changes. If the inflation goal is set too low, the government might decrease spending to stay within the limits of the goal, and this would cause unemployment to increase. In this case, some inflation is the cost to keep unemployment from rising. In addition, over time the quality of goods improves and new products are introduced. The CPI measures price changes but not product changes and thus may overstate inflation. The goal of 3 percent allows for these changes.
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What will be an ideal response?
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Answer the following statement true (T) or false (F)
What is the difference between a tariff and a quota?
What will be an ideal response?
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