You Are a Staff Economist with the Federal Reserve

question 40

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?" How 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:

English Rule

A rule which states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract.

American Rule

The American Rule is a legal principle stating that each party in a lawsuit is responsible for paying their own attorney's fees, unless specific authority granted by statute or contract allows the prevailing party to recover those fees from the loser.

Delegation of Duties

The process of assigning specific responsibilities or tasks to another individual, often within an organizational setting.

Promisee

In a third-party beneficiary contract, the party to the contract who owes something to the promisor in exchange for the promise made to the third-party beneficiary.