If the Fed Follows a Policy of Targeting the Inflation

question 141

Multiple Choice

If the Fed follows a policy of targeting the inflation rate:

• A) the natural rate of unemployment will rise.
• B) its credibility will be enhanced.
• C) the financial market will be more confused.
• D) it will likely face more political pressures.

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Definitions:

Surplus

An excess amount of a commodity or resource beyond what is needed or utilized.

Quantity Supplied

In economic terms, this is the amount of a good or service that producers are willing and able to sell at a given price over a specific time period.

Surplus

The amount of an asset or resource that exceeds the portion used. In economics, it refers to a situation where supply exceeds demand.

Shortage

A situation in which demand for a good or service exceeds the available supply at the current price.