Question

The Reserve Bank of Australia (RBA) has economic growth, price stability and improve standard of living as its major goals. The RBA uses inflation targeting as one of its policy tools to achieve the goals. Define inflation targeting. Explain why inflation is more of a concern to businesses that are engaged in tradeable (export and import) activates compared to those involved in domestic trade only. How would inflation targeting improve the living standards of all Australians?

Answer 1

Inflation targeting is one of the monetary tool used by the central bank to achieve targeted rate of inflation. It affect export and import related business. Due to inflation the price of goods and services in a country increases compared to another country so the import increases and export decreases. With the help of inflation targeting, Reserve Bank of Australia can able to set a adequate inflation level and price stability to avoide serious inflation pressure to safeguard the population.