When a Central Bank Engages in Inflation Targeting

question 26

Multiple Choice

When a central bank engages in inflation targeting

• A)unemployment isn't affected since nominal interest rates are kept very low
• B)interest rates are raised substantially as soon as the output gap increases
• C)interest rate stability is an explicit policy goal
• D)little weight is give to transparency
• E)little or no weight is given to the output gap

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Definitions:

General Adaptation Syndrome

A theory in psychology that defines the three stages of response (alarm, resistance, exhaustion) that the body goes through when exposed to chronic stress.

Type D Personality

A personality type characterized by high levels of stress, negativity, and the tendency to experience uncomfortable emotions.

Internal Locus

A psychological concept referring to individuals who believe they have control over their life events and outcomes.

Locus of Control

A psychological concept referring to the extent to which individuals believe they have control over the outcomes of events in their lives.