In Setting Interest Rates, the Fed Reacts Directly to

question 80

Multiple Choice

In setting interest rates, the Fed reacts directly to

• A)the output gap.
• B)the price level.
• C)the level of potential GDP.
• D)the level of real GDP.
• E)the level of investment.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales volume, such as rent, salaries, and insurance premiums.

Mixed Costs

Expenses that have both fixed and variable components, changing in total with the level of activity but not in proportion.

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.

Mixed Cost

A cost that contains both variable and fixed cost components, changing in total with volume but remaining constant per unit.