If the Fed's Policy Reaction Function Equals R =

question 161

Multiple Choice

If the Fed's policy reaction function equals r = .02 + π, where r is the real interest rate and π is the inflation rate. When the inflation rate is zero, then the real interest rate will be:

• A)set to equal 2 percent.
• B) below the target value for the real interest rate.
• C)set to equal zero.
• D)set to equal 4 percent.

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Definitions:

Projection

A defense mechanism where an individual attributes their own undesired feelings, thoughts, or impulses onto someone else.

Perception

The process by which individuals organize and interpret their sensory impressions to give meaning to their environment.

Self-Efficacy

An individual’s belief in their own capability to execute behaviors necessary to produce specific performance attainments.

Attribution Theory

A theory focused on how people interpret and understand their own behavior and the behavior of others by attributing causes to actions.