Exam 14: Stabilizing the Economy: the Role of the Fed

Reduced macroeconomic variability in the U.S. since the 1981 has all of the following benefits EXCEPT:

All of the following are examples of the independence of the U.S. Federal Reserve System EXCEPT that:

An inflation _____ may be more likely to stabilize output as well as inflation because they have established credibility and _____.

Suppose last year Moe faced a 25% marginal tax rate. This year tax rates increased and now Moe faces a 30% marginal tax rate. Moe chooses to work fewer hours this year because

The time between when Congress decides to cut taxes to stimulate aggregate demand and when the tax cuts are implemented is an example of:

Starting from full employment at the initial target inflation rate, if there is an adverse inflation shock, then the Federal Reserve must _____ in order to avoid a recession.

Someone who is not strongly committed to achieving and maintaining low inflation is called a(n):

Real wages can be cut without cutting nominal wages if:

Shocks to aggregate demand ______ require the Fed to choose between inflation and output stability; shocks to aggregate supply ______ require the Fed to choose between inflation and output stability.

To prevent inflation from becoming permanently higher following an adverse inflation shock the Fed must ____, while to offset the effect of an increase in aggregate demand the Fed must _____.

To accommodate an adverse inflation shock the Fed must ____, while to offset the effect of an increase in aggregate demand the Fed must _____.

Central banks that practice flexible inflation targeting are ____ than central banks that practice strict inflation targeting.

The degree to which the public believes the central bank's promises to keep inflation low, even if doing so may impose short-run economic costs is the _____ of monetary policy.

The inside lag is relatively shorter for _____ policy and the outside lag is relatively shorter for _____ policy.

Someone who is committed to maintaining low inflation even at the short-run cost of reduced output and employment is called a(n):

Which of the following statements about inflation targeting is true?

The second round increase in inflation following an adverse supply shock is the result of:

If the rate of inflation equals zero then the real rate of interest:

Fiscal policy can shift

The marginal tax rate is: