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1. In most countries, price stability has become the primary objective of monetary policy. Central bankers, economists, and other knowledgeable observers around the world agree that price stability both contributes importantly to the economy’s growth and employment prospects in the longer term and moderates the variability of output and employment in the short to medium term.
2. Price stability is considered as a situation in which the economy’s price level does neither increase nor decrease over time; that said, price stability is a situation in which inflation (that is an ongoing increase in the economy’s price level) and deflation (that is a ongoing decline in the economy’s price level) are actually absent, or, to put it differently: price stability is a situation in which the purchasing power of money remains unchanged over time.
3. The idea of preserving the value of money by stabilising the economy’s price level – which is actually typically represented by a consumer price index – is based on the work of Irving Fisher (1867–1947) between 1895 and 1922, in particular on Fisher’s The Making of Index Numbers from 1922. Fisher was one of the first experts on the calculation of price index numbers, and he began the first weekly newspaper publication of a wholesale price index in 1923. Before that, the value of the currency was fixed against a certain amount of gold. In fact, Fisher’s «index regime» has become the «state-of-the-art» concept in monetary policy.
(Ansgar Belke : Monetary economics in globalised financial markets / A. Belke, T. Polleit. – Springer, 2009. – P.531).
Choose the correct summary of the text.
The extract I am going to speak about is from the monograph «Monetary economics in globalised financial markets» edited by Ansgar Belke and Thorsten Polleit. In most countries, price stability has become the primary objective of monetary policy. All knowledgeable people around the world know that price stability facilitates a lot to economy’s growth and employment. We speak about price stability when there is no inflation or deflation. They are fortunately absent. Purchasing power of money remains the same over time. It was a brilliant economist Fisher, who invented the calculation of price index numbers. Before that, the value of the currency was fixed against a certain amount of gold.
I’ve read the passage from the monograph «Monetary economics in globalised financial markets». A key question of the extract is how to obtain price stability. It means absence of inflation and deflation, as you know. I’d like to note that it is quite clear that inflation is an ongoing increase in the economy’s price level and deflation is an ongoing decline in the economy’s price level. Between 1895 and 1922 Irving Fisher wrote a work where he represented the idea of preserving the value of money by stabilizing the economy’s price level. Before him, the value of the currency was fixed against a certain amount of gold. His index regime was state-of-the-art.
The passage is taken from the monograph «Monetary economics in globalised financial markets» edited by Ansgar Belke and Thorsten Polleit. The extract is about price stability as a main goal of economists all over the world. Price stability is a situation in which the economy’s price level doesn’t change over time, that is inflation and deflation are absent. The passage supports the view that price stability initiates economy’s growth and employment. So price stability is a great thing! It was Irving Fisher who first represented consumer price index in his newspaper publication of a wholesome price index in 1923. This «index regime» became out-of date concept in monetary policy.
The extract I’d like to speak about is from the monograph «Monetary economics in globalised financial markets» edited by Ansgar Belke and Thorsten Polleit. It deals with the problem of price stability as a situation in which the purchasing power of money remains unchanged over time. The main idea of the passage is to reveal the fact that preserving the value of money by stabilizing the economy’s price level, represented by a consumer price index is the primary objective of monetary policy. According to the survey economists and bankers agree that price stability contributes importantly to economic growth and employment prospects in the longer term. Due to economist Irving Fisher «state-of-the-art» concept of index regime was represented in 1922.
