Exam 24: Monetary Policy: a Summing up

Assume that the RBA sets monetary policy according to the Taylor rule. Suppose current Australian macroeconomic conditions are represented by the following: n < n* and u = un. Given this information, we would expect that the RBA will:

Explain the macroeconomic effects of changes in monetary policy in: (1) the short run; and (2) the medium run.

Discuss the reasons that prompted most central banks in advanced economies to abandon monetary growth targets.

Explain the costs imposed by an increase in inflation.

Monetary policy has medium- run effects on which of the following?

Suppose an economy experiences an increase in inflation. Explain the possible macroeconomic benefits of this increase in inflation.