An Advantage of an Intermediate Targeting Strategy Is That It

question 102

Multiple Choice

An advantage of an intermediate targeting strategy is that it provides the Fed with

• A) more timely information regarding the effect of monetary policy.
• B) a slow adjustment process.
• C) a target that is precisely correlated with economic activity.
• D) all of the above.
• E) only A and B of the above.

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Definitions:

Interest Rate Parity

A theory explaining the relationship between interest rates and the exchange rate between two currencies.

Gilts

Government bonds issued by the United Kingdom, considered low-risk investments.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, treasury bills, and notes.

Interest Rate Differential

The difference in interest rates between two distinct economic regions or between different types of financial instruments.