A Central Bank Increases Its Inflation Target When Real and Potential

question 13

Multiple Choice

A central bank increases its inflation target when real and potential GDP are equal if it

• A)wants to avoid a political business cycle.
• B)succumbs to political pressure to stimulate the economy.
• C)wants to raise the rate of inflation in the long run.
• D)is more concerned with long-run stability than short-run gain.
• E)wants to lower the rate of inflation in the long run.

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Definitions:

Net Income

The net income of a company, calculated by subtracting all costs and taxes from its total revenue.

Writing Off

The accounting action of declaring an asset to be of no value and clearing it off the books, often due to irrecoverability or obsolescence.

Bad Debts

Amounts owed to a company that are not expected to be paid, often resulting from credit sales to customers who are unable to fulfill their financial obligations.

Inventory Reserve

A provision for unsellable inventory, reflecting a decrease in the value of inventory assets.