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:

Fixed Cost

A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity.

Special Order

A one-time customer order, often at a negotiated price, that is outside the company's standard range of products or services.

Irrelevant

Pertains to information or factors that do not influence or impact a decision-making process.

Split-off Point

The stage in a production process where joint products are identifiable or separable into individual products.