In the context of monetary policy frameworks, 'Average Inflation Targeting' involves:
A. Ignoring past inflation outcomes completely
B. Targeting an average inflation rate over a multi-year period, allowing temporary overshoots to make up for past undershoots
C. Targeting only the current inflation rate
D. Only targeting the price level
Answer: Option B
Solution (By JKSSB Mock Tests)
Average inflation targeting commits the central bank to achieve an average inflation rate over a longer period, so that periods of below-target inflation are followed by periods of above-target inflation (and vice versa).
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