Interest Rate Targeting May Be Problematic When

question 2

Multiple Choice

Interest rate targeting may be problematic when

• A) the central bank cannot distinguish shocks to money supply from shocks to money demand.
• B) there is a large fraction of borrowers in the economy.
• C) the central bank cannot distinguish shocks to money demand from shocks to total factor productivity.
• D) there is a large fraction of lenders in the economy.
• E) the central bank engages in open market operations.

---

Definitions:

Fresh Language

New or original ways of using words and phrases to communicate effectively or creatively.

Stacking Questions

A communication technique involving asking several questions at once, which can overwhelm or lead the respondent in a certain direction.

Mental Stamina

The strength and perseverance to continue or complete tasks even when they are challenging or when one is facing mental fatigue.

Captive Clients

Clients who are obliged to use a service, often due to legal, institutional, or situational constraints, rather than out of personal choice or preference.