If People Have ________________, an Announced Monetary Contraction by the Fed

question 177

Multiple Choice

If people have ________________, an announced monetary contraction by the Fed that is credible could reduce inflation with little or no increase in inflation.

• A)rational expectations
• B)irrational expectations
• C)no expectations
• D)None of the above is correct.

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Definitions:

Coupon Rate

The interest payment made annually on a bond, shown in percentage terms of its face value.

Time To Maturity

The duration remaining until the final payment date of a loan, bond, or other financial instrument, at which point the principal (and usually the final interest payment) is due to be paid.

Interest Rate Risk

The risk that the value of an investment will decrease due to a change in interest rates.

High Coupon Bond

A bond that offers a relatively high interest rate (or coupon rate) compared to the current prevailing rates of other similar bonds.