Which of the Following Statements Best Describes What It Means

question 17

Multiple Choice

Which of the following statements best describes what it means for the Fed to manage aggregate demand?

• A)If real and potential GDP were equal, the Fed would change interest rates even if the rate of inflation equaled the target rate of inflation.
• B)The Fed changes interest rates only if the rate of inflation is deviating from the target rate of inflation.
• C)If real and potential GDP were not equal, the Fed would change interest rates in order to prevent a deviation between the rate of inflation and the target rate of inflation.
• D)The Fed changes interest rates only if the rate of inflation is higher than the target rate of inflation.
• E)If real and potential GDP were not equal, the Fed would change interest rates only in those cases that would prevent the rate of inflation from rising above the target rate of inflation.

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Definitions:

Trading Costs

Expenses associated with buying and selling securities, including commissions, spreads, and fees.

Open-end

A type of mutual fund that does not have a fixed number of shares and can issue new shares or redeem existing shares at any time based on investor demand.

Net Asset Value

The per-share value of a mutual fund or exchange-traded fund, calculated by dividing the total value of all securities in the portfolio by the number of shares outstanding.

Net Asset Value

Net Asset Value (NAV) is the per-share value of a mutual fund or ETF, calculated by dividing the total value of all the assets in the portfolio, minus liabilities, by the number of shares outstanding.