FINA 385 BMC Review Questions

What was the output gap in 1973? (see chart 8) a) +3% b) +160 c) -3.2% d) -80 At the point in time shown, where is the country’s 10-y inflation expectation in relation to the Central Bank’s inflation target? a) 2.0239% above b) c) 0.0239% above d) 0.4761 below Investors who fear rising inflation may buy Treasury Inflation-Protected Securities (TIPS). How do TIPS shield lenders from inflation? a) By disbursing gold bullion b) By offsetting the inflation with deflation c) By triggering an insurance payout d) By compensating investors for inflation What is the Federal Reserve’s favorite inflation gauge? a) Core PCE b) GDP deflator c) CPI d) Household income What was likely the Fed interest rate policy? a) To maintain high-interest rates b) To maintain low-interest rates c) To hike interest rates d) To cut interest rates