Under a Nominal GDP Targeting Rule, the Central Bank

question 30

Multiple Choice

Under a nominal GDP targeting rule, the central bank

• A) must publish its expected inflation rate.
• B) lowers its interest rate when nominal GDP falls below target.
• C) loses its ability to influence the inflation rate.
• D) changes the interest rate only when real GDP, and hence nominal GDP, is off target.
• E) cannot use short-term interest rates to conduct monetary policy.

Analyze the factors influencing changes in social behaviors, such as littering, through interventions beyond financial incentives.

Comprehend the rationale behind actions involving fairness in various contexts, including charitable giving and tipping.

Grasp the importance of historical data in estimating returns on equity investments.

Recognize common biases in consumer decision-making and the role of anchoring.

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Definitions:

Crowding-Out Effect

The phenomenon where increased government spending leads to a reduction in private sector spending and investment due to higher interest rates or other factors.

Government Spending

The total amount of public expenditure by a government, including spending on defense, education, public infrastructure, and welfare programs.

Private Investment

The expenditure on capital goods by private sector firms or individuals in order to generate future income or profits, excluding government spending.

Crowding-In Effect

An increase in private sector spending stimulated by federal budget deficits financed by U.S. Treasury borrowing.