The Federal Reserve Will Use an Inflation Rate Target of 2

question 362

Multiple Choice

The Federal Reserve will use an inflation rate target of 2 percent to

• A) compensate for upward measurement bias in how the inflation rate is calculated.
• B) allow for downward wage flexibility.
• C) avoid the zero lower bound problem.
• D) All of these choices are correct.

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Definitions:

Budgeted Item

An expense or income that has been planned for and included in a budget.

Traded Asset

An asset that is bought and sold in financial markets, such as stocks, bonds, commodities, or currencies.

Capital Expenditure

Capital invested by an enterprise in procuring or upgrading solid assets such as land, manufacturing facilities, or hardware.

Equity Account

An account representing the owner's interest in the company, calculated as total assets minus total liabilities.