When a Central Bank Sets a Target for the Interest

question 107

Multiple Choice

When a central bank sets a target for the interest rate, what does it commit itself to?

• A) revealing its target to the public
• B) adjusting the demand for money in order to make the equilibrium in the money market hit that target
• C) adjusting the money supply in order to meet the interest-rate target
• D) having to make open-market sales

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Definitions:

Tax-Free

Tax-free describes goods, transactions, or income that are not subject to taxation by the government.

Taxed

Subjected to a financial charge or levy by a government on income, goods, or activities.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, resulting in those who have higher incomes being taxed at a higher rate.

Progressive Tax

A taxation system where the tax rate increases as the taxable amount or income increases.