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Beginning of Paper
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Conflicting Goals in Economic Growth
Goals of monetary policy are to "promote maximum employment, inflation
(stabilizing prices), and economic growth." If economists believe it's possible
to achieve all the goals at once, the goals are inconsistent. There are
limitations to monetary policy.
The term "maximum employment" means that we should try to hold the
unemployment rate as low as possible without pushing it below ....
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Middle of Paper
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.... indicates a
negative relation; that is, the higher the inflation, the lower the rate of real
growth.
Evidence suggesting that low inflation promotes growth has motivated
recent decisions by a number of central banks and governments, most notably New
Zealand. Canada, the United Kingdom and Sweden also have moved in recent years
to establish monetary policy with official low inflation targets. Decisions to
adopt a policy objective of low inflation ....
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