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

question 58

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 ʺmistakeʺ
www.nytimes, 7/1/2004
As a result of the Fedʹs policy, which of the rates will increase?

• A) the short-term interest rate
• B) the long-term interest rate
• C) the exchange rate
• D) All of the above answers are correct.

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Wholesale Distributor

A business entity that purchases goods in large quantities from manufacturers and sells them in smaller quantities to retailers or other distributors.

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A limit imposed on the area or region where a product or service can be sold or provided.

Price-Cutting

The practice of reducing prices, often below the normal value, to attract customers or undermine competitors.