Management of Expectations by a Central Bank Is Based on the View

question 63

Multiple Choice

Management of expectations by a central bank is based on the view that ________.

• A)decreasing the federal funds rate will lead to a reduction in the discount rate
• B)if economic agents believe that the price of an individual asset will rise in the future,they will buy that asset today,contributing to its eventual price increase
• C)if households expect an increase in prices in the future,they will engage in spending today
• D)households will increase their spending today if they believe that the monetary authorities are committed to maintaining low interest rates

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