When Hit with a Real Negative Economic Shock, the Fed

question 131

Multiple Choice

When hit with a real negative economic shock, the Fed must make its policy choice between

• A) too low of a growth rate and too high of an unemployment rate.
• B) too low of a growth rate and too high of an inflation rate.
• C) too high of a growth rate and too low wages.
• D) too high of a growth rate and too low of a savings rate.

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Definitions:

Market Basket

A selected set of goods and services used to track changes in prices and inflation over time, representing the typical consumption of a household.

CPI

A gauge of the weighted average cost of a selection of consumer goods and services, including transportation, healthcare, and food, known as the Consumer Price Index.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services.

Market Basket

A fixed list of items used to track the progress of inflation in an economy.