Given an Economy with Flexible Prices, a Description of Domestic

question 4

Multiple Choice

Given an economy with flexible prices, a description of domestic monetary policy can be expressed as to

• A) maintain interest rates slightly above the world rate to create a reserve buffer.
• B) maintain interest rates slightly below the world rate to reduce the opportunity cost of creating a reserve buffer.
• C) keep the domestic price level equal to world prices expressed in terms of domestic currency through the exchange rate.
• D) keep net exports equal to zero by manipulating the price level to move against the exchange rate.
• E) keep the economy operating at full potential in the face of potentially large shifts in aggregate demand derived from random shocks to net exports.

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Definitions:

Target Response

Target response refers to a specific behavior or reaction that is sought or aimed for in a particular context, such as in learning or experimental conditions.

Negative Reinforcement

A process in behavioral psychology where the removal of an undesirable stimulus strengthens a behavior.

Positive Reinforcement

A method in behavioral psychology of increasing the likelihood of a specific response by following it with a pleasurable or rewarding stimulus.

Target Response

In behaviorism, it refers to a desired behavior or outcome that is sought in a conditioning process.