Suppose the Fed's Primary Goal Is Price Stability and It

question 93

Multiple Choice

Suppose the Fed's primary goal is price stability and it aims to keep the inflation rate at 2%. If the inflation rate rose above 2%, what should it do?

• A) pursue an expansionary monetary policy
• B) pursue a contractionary monetary policy
• C) reduce the required reserve ratio
• D) impose a temporary ceiling on the federal funds rate

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Definitions:

Minimal Stimulus

The smallest level of stimulation that can be detected or that elicits a response from an organism.

Absolute Threshold

The minimum intensity of a stimulus that one can detect 50% of the time, delineating the boundary between detectable and undetectable sensations.

Difference Threshold

The minimal change in stimulation that an individual can detect 50% of the time, also known as the just noticeable difference (JND).

Subliminal Perception

The processing of information by sensory systems without a person's conscious awareness.