To Determine Whether the Goal of Stable Prices Is Being

question 22

Multiple Choice

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors

• A)the GDP price deflator.
• B)the core PCE deflator inflation rate.
• C)the producer price index.
• D)the CPI.
• E)the core GDP deflator inflation rate.

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Definitions:

Time Preference

The inclination of individuals to prefer goods and services sooner rather than later.

Rational Expectations

The hypothesis that individuals form predictions of the future based on available information and act on those predictions rationally.

Consumption Goods

Goods that are purchased by consumers for the purpose of consumption and not for resale.

Capital Goods

Physical assets such as buildings, machinery, and equipment used by businesses to produce goods and services.