Analysis of the Transmission Mechanisms of Monetary Policy Provides Four

Multiple Choice

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. These lessons include the following.

A) Rising interest rates indicate a tightening of monetary policy,whereas falling interest rates indicate an easing of monetary policy.
B) Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero.
C) Avoiding fluctuations in the level of unemployment is an important objective of monetary policy,thus providing a rationale for interest-rate stability as the primary long-run goal for monetary policy.
D) Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are not important elements in various monetary policy transmission mechanisms.