Inflation Targeting Has the Potential to Reduce the Likelihood That

question 54

Multiple Choice

Inflation targeting has the potential to reduce the likelihood that the central bank will fall into the time-inconsistency trap of trying to ________ output and employment in the short run by pursuing overly ________ monetary policy.

• A) lower; tight
• B) expand; expansionary
• C) lower; expansionary
• D) expand; tight

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Definitions:

Markup Percentage

A measure of how much the price of a product or service is increased over its cost to the seller, expressed as a percentage of the cost.

Variable Product Cost

Expenses that fluctuate in direct proportion to the amount of output produced, including direct labor and raw materials.

Fixed Costs

Expenses that do not change with the level of production or sales, including rent, salaries, and insurance, providing contrast to variable costs.

Operating Income

Earnings before interest and taxes (EBIT), calculated as gross income minus operating expenses, excluding non-operating income and expenses.