The Fed Tries to Achieve Its Policy Goals in the Macroeconomy

question 43

Multiple Choice

The Fed tries to achieve its policy goals in the macroeconomy by manipulating

• A) the currency component of the monetary base almost exclusively.
• B) the reserve component of the monetary base almost exclusively.
• C) the savings behavior of private citizens.
• D) both the currency and reserve components of the monetary base.
• E) the rate of influx of foreign currency into the country.

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Definitions:

Anchoring and Adjustment

A cognitive bias in decision-making where an initial piece of information (the anchor) heavily influences subsequent judgments and adjustments.

Availability Bias

A cognitive bias that influences decisions based on the immediate examples that come to a person's mind.

Negotiation

A process of discussing issues openly and attempting to reach a joint decision or agreement.

Risk-Averse

The tendency to prefer avoiding losses over achieving equivalent gains.