To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency, the Federal Reserve could
A) raise government spending. B) sell Treasury securities.
C) raise bank taxes. D) lower the required reserve ratio.
Question 2
Which of the following statements about inflation targeting is true?
A) Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals.
B) Inflation targeting by the central banks in other countries has not typically lowered inflation.
C) Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation, improving their planning and the efficiency of the economy.
D) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession.
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