ʺAs the Fed Chases Inflation, Critics Shout, ʹFaster!ʹ

question 103

Multiple Choice

ʺAs the Fed Chases Inflation, Critics Shout, ʹFaster!ʹ
ʺFor weeks, the Fed has broadcast its intention to raise interest rates glacially.ʺ The Fed was moving slowly, according to an economist because ʺ... the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check.ʺ The Fed, recognizing that the economy was improving stated it planned to ʺrespond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.ʺ Other economists disagree with the Fedʹs restrained policy as a ʺmistake.ʺ
Www.nytimes, 7/1/2004
Economists estimate that if the Fedʹs policy was enacted in July 2004, the impact on the economy

• A) can be expected to stretch over one to two years.
• B) will reach its fullest extent, affecting real GDP, in three to six months.
• C) will not be evident in the exchange rate market until 2005.
• D) will occur to its fullest extent within one month.

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