Starting from Full Employment at the Initial Target Inflation Rate

question 4

Multiple Choice

Starting from full employment at the initial target inflation rate, if there is an adverse inflation shock, then the Federal Reserve must _____ in order to keep inflation from becoming permanently higher.

• A)increase the target inflation rate.
• B)decrease the target inflation rate.
• C)maintain the initial target inflation rate.
• D)shift the short-run aggregate supply curve up.

---

Definitions:

External Influences

Factors outside of an individual's immediate control that impact their behavior, decisions, or performance.

High Self-esteem

A positive and confident evaluation of oneself and one's abilities.

Self-evaluation

The process of examining one's own performance or qualities, often to identify areas for improvement.

Behavioural Plasticity

The capacity of an individual to change or adapt their behavior in response to changing environmental conditions or experiences.