When the Federal Reserve reduces interest rates lower than would be expected given its standard response to inflation, then this is evidence of:
A)an inflation-induced response.
B)an output-induced response.
C)a market-induced response.
D)contractionary monetary policy.

Question

Quizplus · Accepted Answer

A lower interest rate than what would typically be expected in response to inflation indicates that the Fed is more concerned with stimulating output and employment than keeping inflation under control. This is called an output-induced response.

When the Federal Reserve Reduces Interest Rates Lower Than Would