Exam 16: The Conduct of Monetary Policy: Strategy and Tactics

Explain the time-inconsistency problem.What is the likely outcome of discretionary policy? What are the solutions to the time-inconsistency problem?

The Fed was committed to keeping interest rates low to assist Treasury financing of budget deficits

In practice,the Fed's policy of targeting ________ in the 1960s proved to be ________,destabilizing the economy.

The goal for high employment should be a level of unemployment at which the demand for labor equals the supply of labor.Economists call this level of unemployment the

The monetary policy strategy that suffers a lack of transparency is

The "Greenspan doctrine" - central banks should not try to prick bubbles - was based on which of the following arguments?

During World War II,whenever interest rates would rise and the price of bonds would begin to fall,the Fed would

Which of the following is not an element of inflation targeting?

Foreign exchange rate stability is important because a decline in the value of the domestic currency will ________ the inflation rate,and an increase in the value of the domestic currency makes domestic industries ________ competitive with competing foreign industries.

A central bank has ________ chance to identify a credit-driven bubble compared to an irrational exuberance bubble.

Explain what inflation targeting is.What are the advantages and disadvantages of this type of monetary policy strategy?

If the central bank targets a monetary aggregate,it is likely to lose control over the interest rate because

The type of monetary policy that is used in Canada,New Zealand,and the United Kingdom is

Explain and demonstrate graphically how targeting nonborrowed reserves can result in federal funds rate instability.

The Fed's use of the ________ as an operating target in the 1970s resulted in ________ monetary policy.

Large fluctuations in money supply growth and smaller fluctuations in the federal funds rate between October 1982 and the early 1990s indicate that the Fed had shifted to ________ as an operating target.

Inflation targets can increase the central bank's flexibility in responding to declines in aggregate spending.Declines in aggregate ________ that cause the inflation rate to fall below the floor of the target range will automatically stimulate the central bank to ________ monetary policy without fearing that this action will trigger a rise in inflation expectations.

The Fed-Treasury Accord of March 1951 provided the Fed greater freedom to

International policy coordination refers to

The Fed accidentally discovered open market operations when