Between 1970 and 2000, If the Fed Had Tried to Hit

question 67

Multiple Choice

Between 1970 and 2000, if the Fed had tried to hit the money growth targets:

• A) the economy would have likely experienced very high inflation.
• B) the federal funds rate would have changed often and by large amounts.
• C) the interest rates would have likely been more stable.
• D) the economy would have likely experienced very high inflation but the interest rates would have likely been more stable.

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Definitions:

Compounded Annually

This term refers to the process of adding interest to the principal sum of a loan or deposit, or in other words, interest on interest, with the effects of compounding happening once per year.

Present Values

The value today of a future sum or series of cash payments, calculated using a particular rate of return, for the purpose of discounting and assessing investment options.

Discount Rate

The discount rate applied in the discounted cash flow (DCF) methodology to calculate the current value of anticipated cash flows, considering the time value of money and associated risks.

Present Value

The current price of a future sum of money or stream of cash flows, discounted at a certain rate of return.