If the Fed Enhances Its Credibility When It Sets Its

question 98

Multiple Choice

If the Fed enhances its credibility when it sets its own inflation targets,

• A) long term interest rates will be more responsive to changes in the short term interest rates.
• B) long term interest rates will be less responsive to changes in the short term interest rates.
• C) short term interest rates will be less responsive to changes in the long term interest rates.
• D) short term interest rates will be more responsive to changes in the long term interest rates.

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Definitions:

Income Tax

A tax levied by governments on individuals or entities' income, where the tax rate often varies by the amount of income or profits reported.

Burden Percentage

Burden percentage often relates to the proportion of costs or taxes borne by an entity, indicating its financial impact.

Utilitarian Justice

A principle in ethics suggesting that the best action is the one that maximizes utility or happiness for the greatest number of people.

Total Utility

Full enjoyment obtained by consuming a certain amount of products or services.