If in the Simple Monetary Rule and the Inflation

question 56

Multiple Choice

If in the simple monetary rule and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will:

• A) lower the target rate by 2 percent.
• B) raise the interest rate by 1 percent.
• C) lower the interest rate by 1 percent.
• D) lower the marginal product of capital by 1 percent.
• E) Not enough information is given.

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Definitions:

Cash Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.

Total Stockholders' Equity

The total value of a company's assets minus its liabilities, representing the ownership interest of shareholders.

Common Stock

Shares representing ownership in a company, entitling holders to vote on corporate issues and receive dividends.

Rotenone

A naturally occurring pesticide derived from the roots of certain plants, used to control insects and invasive fish species.