Read the introductory section of the Report on Monetary Policy for 1999/2000.

Questions:

1. What is the inflation target for 2000?
2. Why might a lower inflation rate result in lower real interest rates?
3. Why is there a need for such a policy in Mexico?
4. Using the economic concepts discussed in this chapter of your text, describe the expected effects of such a monetary policy on the interest rate and output over time.