"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For Weeks

question 190

Multiple Choice

"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "...the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake."
Www) nytimes, 7/1/2004
The goal of the Fed's policy in 2004 was to decrease

• A) the exchange rate
• B) consumption expenditure
• C) the long-term interest rate
• D) the short-term interest rate

Analyze the implications of market price changes on firm’s profit-maximizing output and decision to stay in business.

Understand the role of marginal revenue and marginal cost in the production decision-making of price-taker firms.

Recognize the impact of regulatory changes on industry competition and pricing.

Understand the conditions for long-run economic profit or loss in price-taker markets.

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Definitions:

Compound Annual

The rate of return that would be required for an investment to grow from its beginning balance to its ending one, assuming the profits were reinvested at the end of each period of the investment's lifespan.

Rate of Return

The profit or deficit experienced on an investment during a particular timeframe, represented as a proportion of the investment's initial expense.

Templeton Growth Fund

A mutual fund that aims for long-term capital growth by investing primarily in the equity of companies around the world.

Invested

Money that is allocated for a particular purpose, such as buying stocks or bonds, in the hope of generating a financial return.