You Are a Staff Economist with the Federal Reserve

question 2

Multiple Choice

You are a staff economist with the Federal Reserve.The chairman says to you,"The rate of change in inflation is too high and I think the Phillips curve is horizontal.What should we do to reduce these inflationary increases?" You respond with,

• A)"Because the Phillips curve is flat,we can do nothing to change the rate of inflation,as it does not respond to changes in output."
• B)"Because the Phillips curve is flat,we need to increase interest rates a lot,as the change in inflation is not very responsive to changes in output."
• C)"Because the Phillips curve is flat,we need to decrease interest rates a lot,as the change in inflation is not very responsive to changes in output."
• D)"Because the Phillips curve is flat,we need to increase interest rates a lot,as the change in inflation is infinitely responsive to changes in output."
• E)"You are not giving me enough information."

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Definitions:

Qualified Day Care Center

A childcare facility that meets specific regulatory standards and qualifications to be recognized for certain tax benefits.

Child and Dependent Care Expense Credit

A tax credit offered to taxpayers to offset costs for the care of children or dependents, to allow them to work or look for work.

Maximum Amount of Expenses

The highest allowable sum that can be counted as an expense for tax or budgetary purposes.

Joint Returns

A combined tax return filed by legally married couples who choose to report their incomes, exemptions, and deductions on the same tax return.