You Are a Staff Economist with the Federal Reserve

question 7

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 don't think the Phillips curve is very steep. What should we do to reduce these inflationary increases?" What do you respond?

• A) "Because the Phillips curve is relatively flat, we need to increase interest rates a lot, as the change in inflation is not very responsive to changes in output."
• B) "Because the Phillips curve is relatively flat, we need to decrease interest rates a lot, as the change in inflation is not very responsive to changes in output."
• C) "Because the Phillips curve is relatively flat, we need to increase interest rates only a little, as the change in inflation is very responsive to changes in output."
• D) "Because the Phillips curve is relatively flat, we need to increase interest rates only a little, as the change in inflation is not very responsive to changes in output."
• E) "Because the Phillips curve is relatively flat, we can do nothing to interest rates, as the change in inflation does not respond to changes in output."

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Definitions:

Homeostasis

The process by which a biological system maintains stability while adjusting to conditions that are optimal for survival.

Symbolic Boundaries

Conceptual distinctions made by social groups to categorize objects, people, and practices, that can include moral or cultural values.

Perverse Triangle

A term likely used to describe dysfunctional relationships or interactions within a group, where behavior negatively deviates from societal norms. (Note: This is not a widely recognized standard term, and its specific meaning can vary depending on context).

Morphostasis

The process or ability of a system, such as a biological or social system, to maintain stability or "keep its shape" amid changes and challenges.