If the Fed Has the Discretion to Choose Its Policy

question 26

Multiple Choice

If the Fed has the discretion to choose its policy and announces a low inflation policy,then

• A)the public is likely to discount this claim because the Fed has an incentive to change their policy in the future.
• B)the public is likely to believe this claim because the Fed has no incentive to change their policy in the future.
• C)the Fed will always cheat and increase inflation in the future.
• D)the Fed will have to keep inflation lower in the future or they will be voted out of office.
• E)none of the above.

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Definitions:

Division Of Labor

The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.

Widowhood

The state or period of being a widow or widower, experienced after the death of a spouse.

Stress Hormones

Chemicals released in the body in response to stress, including cortisol and adrenaline, which prepare the body for a fight or flight response.

Ego Integrity

A sense of satisfaction and fulfillment that comes from looking back on one’s life, typically achieved in late adulthood.