The idea that each country should be allowed to choose its own inflation rate is called the ________ argument.

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09-11-2022
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The idea that each country should be allowed to choose its own inflation rate is called the ________ argument.

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kumarprabhat kumarprabhat · Answer 1 · 2022-11-14T05:05:38+01:00

The idea that each country should be allowed to choose its own inflation rate is called the monetary autonomy argument.

In order to influence its own money supply and the state of its internal economy, a country's central bank must be independent. A central bank may freely regulate the money supply in a system with a floating exchange rate. In order to promote investment and economic growth, it can cut domestic interest rates by increasing the money supply. The rising unemployment rate might be lowered as a result of doing this. Alternately, it might tighten monetary autonomy, raise interest rates, and try to stifle inflation-related growth by reducing the money supply. The government has a tool at its disposal to manage the performance of the domestic economy in the form of monetary policy thanks to monetary autonomy. This provides a second control lever.

Learn more about Monetary autonomy here:

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