If the Inflation Rate Is Equal to the Target Inflation

question 61

Multiple Choice

If the inflation rate is equal to the target inflation rate, then the Fed

• A)does not have to change monetary policy as long as the rate of inflation remains constant.
• B)will only change monetary policy if it wants to change the target inflation rate.
• C)will change monetary policy if it feels that aggregate demand is too high or low.
• D)does not have to worry about changing monetary policy.
• E)will change monetary policy only if it believes that potential GDP is changing.

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Definitions:

Long-Term Investments

Investments held by a company not intended for sale in the short term and expected to deliver value over an extended period.

Interest Receipt

Interest Receipts are amounts received by an individual or a company as interest from investments, loans given, or savings.

Market Rate

The prevailing interest rate available in the market for loans or the return on investment securities.

Preferred Shares

Preferred shares are a type of equity security that typically provide dividends and asset liquidation preference over common shares but usually do not carry voting rights.