What is inflation targeting? when and how does it work?

Answer 1

If I understand your question, inflation targeting is the setting of an acceptable range of inflation by a central bank.

The basic theory is that there is a connection between economic growth and inflation. If the economy grows to fast, there is insufficient supply capacity to meet the growing demand. Under those circumstances, inflation increases as prices increase to create a balance between supply and demand. It is believed that low interest rates stimulate economic growth and high interest rates put a brake on economic growth.

As such, if there is high growth and the central bank believes that inflation is likely to exceed the targeted level, the central bank will use its powers to increase interest rates to slow growth and bring inflation back under control. If the economy slows to much and there is little threat of inflation, the central bank will lower interest rates.

Answer 2

too much of money chasing too few goods is called as inflation.it works as a growth part of an economy.there are several types of inflation like walking inflation,creeping inflation ,glopping inflation,running inflation etc.
inflation is generally rise in general price of goods.
eg:-in great Britain during great depression people took a basket of money to buy a loaf of bread.

Answer 3

This is an hours question but part can be:
When people spend too much on credit forcing up interest rates.