If a Price Shock Caused by a Sharp Increase in Oil

question 138

Multiple Choice

If a price shock caused by a sharp increase in oil prices is believed to be temporary, then the Fed will

• A)raise interest rates based on its monetary policy rule.
• B)lower interest rates based on its monetary policy rule.
• C)do nothing.
• D)lower interest rates, but not by as much as it would if the price shock were permanent.
• E)raise interest rates, but not by as much as it would if the price shock were permanent.

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Definitions:

Rodenticide

A chemical or agent used to kill rodents.

Fungicide

A chemical compound or biological organism used to kill or inhibit the growth of fungi and fungal spores.

Biological Magnification

The increasing concentration of toxic substances within each successive link in the food chain.

Organophosphates

A group of chemical compounds used as insecticides, which can be toxic to animals and humans if exposure occurs.