Question

Can Fed target jobless​ rate? Bernanke hints at new policy

With little​ notice, Bernanke seemed to buck conventional wisdom and suggest that the Fed​ can, and​ should, try to influence the​ long-term unemployment rate. ​Source: CNBC, October​ 10, 2011

Explain whether trying to influence the​ long-term unemployment rate is consistent with the​ Fed's monetary policy objectives. This description of the​ Fed's focus​ ______ consistent with its monetary policy objectives because​ ______.

A. is​ not; focusing on the output gap leads to higher inflation

B. is​ not; the​ Fed's only goal is stable prices

C. ​is; a smaller output gap is the​ Fed's key goal

D. ​is; the​ Fed's major goal is always the same as the​ government's major​ goal, which is employment for everyone

E. ​is; focusing on the output gap meets the​ maximum-employment goal

Answer 1

"A"

it is not consistent with its monetary policy objective because FED's mandate is to promote maximum employment level while keeping the inflation rate stable, this will create lot of inflation in the market trying to fill the output gap. The answer is "A".