"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For Weeks

question 66

Multiple Choice

"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "...the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake."
Www) nytimes, 7/1/2004
Economists estimate that if the Fed's policy was enacted in July 2004, the impact on the economy

• A) will occur to its fullest extent within one month.
• B) can be expected to stretch over one to two years.
• C) will not be evident in the exchange rate market until 2005.
• D) will reach its fullest extent, affecting real GDP, in three to six months.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed overhead—in the cost of a product.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, with fixed overhead expenses treated as period costs.

Units Manufactured

The total number of completed units produced by a manufacturing process during a specific period.

Variable Costing

A costing method in which variable manufacturing costs are included in product costs, while fixed manufacturing costs are treated as period expenses.