Inflation Targeting Is a Policy in Which the Fed

question 28

Multiple Choice

Inflation targeting is a policy in which the Fed

• A) announces an inflation target and then runs monetary policy to hit that target.
• B) tries to reduce inflation by setting a low federal funds rate target.
• C) tries to reduce inflation by setting a high federal funds rate target.
• D) uses open market operations as a method of discretionary intervention, increasing the money supply when there is a recession, and decreasing it when there is an unsustainable economic expansion.

---

Definitions:

Demand Instrument

A financial document that requires immediate payment upon presentation.

Specific Time

A precise or particular moment or duration identified for an event or action.

Negotiable Instrument

A written document guaranteeing the payment of a specified amount of money, either on demand or at a set time.

Relative Permanence

The quality of a negotiable instrument that ensures its longevity.