If the Economy Is in a Long-Run Equilibrium When the Federal

question 52

Multiple Choice

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

• A)monetary policy would ultimately lead to higher potential output but real interest rates and inflation would be unaffected in the long run
• B)monetary policy would ultimately lead to higher inflation but real interest rates and potential output would be unaffected in the long run
• C)monetary policy would ultimately lead to higher interest rates but potential output and inflation would be unaffected in the long run
• D)monetary policy would ultimately lead to higher interest rates,potential output,and inflation in the long run
• E)none of the above

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Definitions:

Head of Household

A filing status for individuals who are unmarried and pay more than half of the costs of keeping up a home for themselves and a qualifying individual.

Dependency Exemption

A tax deduction for taxpayers who support dependents, significantly reduced with the Tax Cuts and Jobs Act of 2017.

Support

In tax terms, support refers to the financial assistance provided for the maintenance of a person, often considered in dependency exemptions.

Life Insurance Premiums

The payments made to an insurance company in exchange for life insurance coverage, which can sometimes be tax-deductible.