Discuss the current debate on the optimal inflation target.

What will be an ideal response?

ANSWER:

At this stage, most central banks in richer countries have an inflation target of about 2%. They are being challenged on two fronts. Some economists want to achieve price stability — that is, 0% inflation. Others want, instead, a higher target rate of inflation, say 4%, to help prevent from falling in the liquidity trap in the future.