If the Fed Were to Announce That Fighting Inflation Is

question 21

Multiple Choice

If the Fed were to announce that fighting inflation is not a high priority for the immediate future ________.

• A)households might expect higher inflation
• B)the short run aggregate supply would shift upwards
• C)firms might begin raising their prices to keep up with expected inflation
• D)all of the above
• E)none of the above

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Definitions:

Present Value

Present value represents the current value of a future amount of money or series of cash flows, discounted at a certain rate of return.

Discount Rate

In finance, the rate used to discount future cash flows to their present value, essentially reflecting the time value of money and risk.

Compounded Monthly

A method of calculating interest where the accrued interest is added to the principal sum each month, leading to an increase in the amount of interest earned over time.

Compounding

The process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.