If the Desired Intermediate Target Is an Interest Rate,then the Preferred

question 91

Multiple Choice

If the desired intermediate target is an interest rate,then the preferred operating target will be a(n) ________ variable like the ________.

• A) interest rate; three-month Treasury bill rate
• B) interest rate; federal funds rate
• C) reserve aggregate; monetary base
• D) reserve aggregate; nonborrowed base

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Definitions:

Domestic Investment

Expenditure on capital within a country that is intended to improve the economy's future production capacity, such as factories, machinery, and infrastructure development.

Net Capital Outflow

The difference between the domestic country's purchase of foreign assets and foreign investments in domestic assets over a certain period.

Real Exchange Rate

The rate at which the goods and services of one country can be exchanged for the goods and services of another country, adjusted for price level differences.

Real Exchange Rate

A measure that reflects the ratio of the prices of goods and services between two countries, taking into account inflation and thereby providing a more accurate comparison.