Consider the following statements:1.Trend inflation refers to the underlying and persistent rate of inflation in an economy over an extended period of time.2.If the inflation target is above trend, monetary policy may turn expansionary, creating inflationary conditions.Select the correct statements using the codes given below:

Q. Consider the following statements:
1.Trend inflation refers to the underlying and persistent rate of inflation in an economy over an extended period of time.
2.If the inflation target is above trend, monetary policy may turn expansionary, creating inflationary conditions..
Select the correct statements using the codes given below:

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Notes:

Explanation –

Statements 1 and 2 are correct. Trend inflation refers to the underlying and persistent rate of inflation in an economy over an extended period of time. If the inflation target is above trend, monetary policy may turn expansionary, creating inflationary conditions.

Source: Mint

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