An understanding of the state of the economy, projections on economic growth, the floor framework, and the way the Federal Reserve works allows you to:
A)accurately forecast the spread between short-term and long-term interest rates.
B)predict the exact inflation rate in the future.
C)predict the size of the future output gap.
D)understand which way interest rates might change.

Question

Quizplus · Accepted Answer

Understanding the state of the economy and the workings of the Federal Reserve allows one to identify the factors that might influence interest rates, and therefore understand which way interest rates might change. Accurately forecasting the spread between short-term and long-term interest rates, predicting the exact inflation rate in the future, and predicting the size of the future output gap are complex tasks that require a comprehensive understanding of various economic factors and are subject to a high degree of uncertainty.

An Understanding of the State of the Economy, Projections on Economic