Exam 26: Transmission Mechanisms of Monetary Policy

If monetary policy can influence ________ prices and conditions in ________ markets, then it can affect spending through channels other than the traditional interest-rate channel.

In the late 1990s and early 2000s, the Japanese economy has experienced ________.

When using reduced-form evidence to evaluate monetary policy and find that M affects Y, ________.

According to Tobin's q theory, ________ policy can affect ________ spending through its effect on the prices of common stock.

Explain the traditional interest-rate channel for expansionary monetary policy. Explain how a tight monetary policy affects the economy through this channel.

The ________ proposes that two types of monetary transmission channels arise as a result of problems in credit markets

In the early 1960s, monetarists used reduced-form timing, statistical, and historical evidence to show that ________.

The monetarists complained that early Keynesian structural models tended to ignore the impact of monetary policy changes on ________.

Movements of ________ interest rates indicate that, contrary to the early Keynesians' beliefs, monetary policy was ________ during the Great Depression.

A rise in stock prices ________ the net worth of firms and so leads to ________ investment spending because of the reduction in moral hazard.

Monetarists' preference for reduced-form models is based on their belief that ________.

Because ________ evidence is of a ________ nature, there is always the possibility of reverse causation, in which output growth causes money growth.

The monetarist ________ evidence in which declines in money growth are followed by recessions provides the strongest support for their position that monetary policy matters.

Real business cycle theorists are critical of monetarist reduced-form evidence because they believe ________.

A basic principle in economics is that ________ does not necessarily imply ________.

If the aggregate price level adjusts slowly over time, then an expansionary monetary policy lowers ________.

Explain what we call structural model evidence in describing the transmission mechanism of monetary policy.

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in ________ and ________.

A basic principle in economics is that correlation ________ imply ________.

The monetarist position on the importance of monetary policy is probably best supported by ________ evidence.