If Workers and Firms Know That the Federal Reserve Is

question 153

Multiple Choice

If workers and firms know that the Federal Reserve is following an expansionary monetary policy,workers and firms will expect inflation to ________ and will adjust wages so that the real wage ________.

• A)increase; increases
• B)increase; remains unchanged
• C)decrease; decreases
• D)increase; decreases

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Definitions:

Discount

denotes a reduction in the price of goods or services typically offered for promotional reasons or to certain groups of customers.

Supplier

An individual or company that provides goods or services to another entity under terms specified in a contract.

Net Present Value

A financial metric used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Monthly Interest Rate

The interest rate applied to a loan or investment for one month, often derived from an annual interest rate.