Exam 21: The Role of Expectations in Macroeconomic Policy

How does central bank independence cause lower inflation?

Monetary policy credibility has the benefit of ________.

One requirement for an effective nominal anchor is ________.

The strength of the movement in the short-run aggregate supply schedule, in response to an aggregate demand shock is determined by ________.

Central bank independence ________.

Both adaptive expectations and rational expectations are prone to error (a discrepancy between the expectation and the actual experience). In each case, how does error affect the formation of new expectations?

Which of the following is most consistent with the time-inconsistency problem?

The effects of the negative supply shocks of 1973, 1979 and 2007 were different due to the ________.

What might an "anti-inflation hawk" do so that good macroeconomic performance is likely to continue under his or her successors as head of the central bank?

Swiss attempts to target monetary aggregates ended in the 1990s because ________.

Economists use ________ to forecast economic activity and to evaluate policy options.

How are rule-based policies similar to adaptive expectations?

A prediction based on rational expectations ________.

An example of the political business cycle in action came during the ________.

The academic work of Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System, suggests that he is a firm advocate of ________.

The use of expansionary fiscal and monetary policy just prior to elections is known as the ________.

Inflation targeting makes more sense than unemployment targeting, because ________.

The country with the highest degree of central bank independence in the period 1973-88 was ________.

If the public believes the commitment to a nominal anchor to be credible, the effect of a negative aggregate demand shock is for ________.

New information ought not to influence economic decision-making if ________.