Question 1

We need some better explanation for why governments that are supposedly only concerned with short term political gains create central bank institutions whose sole purpose is to raise long-term social welfare.

Accepted Answer

A) True 
 B)False  True

Question 2

According to Oatley,

Accepted Answer

A)   very little research energy has been devoted to considering why the behavior and policies of one independent central bank differs substantially from the behavior and policies of another.
B)   a great deal of research energy has been devoted to considering why the behavior and policies of one independent central bank differs substantially from the behavior and policies of another.
C)   most scholarship on central banks assumes that all independent central banks are fundamentally different.
D)   freed from the pressures of electoral politics, independent central banks are generally assumed to pursue price flexibility.
E)   freed from the pressures of electoral politics, independent central banks are generally assumed to pursue the minimum financial regulations possible. A

Question 3

According to Oatley,a good example of a highly independent central bank (1969-1995)is

Accepted Answer

A)   the Reserve Bank of Australia.
B)   the Bank of France.
C)   the Swiss National Bank.
D)   the Bank of Japan.
E)   the Bank of Britain. C

Question 4

Which of the following statements is not a function of central bank independence?

Accepted Answer

A)   The central bank can set monetary policy free from the interference by the government.
B)   The central bank is free to decide what economic objective to pursue.
C)   The central bank is free to decide how to set monetary policy in pursuit of the objective.
D)   Central bank decisions can be reversed by other branches of the government.
E)   Central bank decisions cannot be reversed by other branches of the government.

Question 5

According to the data in the Oatley book,which of the following statement is true?

Accepted Answer

A)   There is overwhelming evidence that countries with more independent central banks have experienced lower rates of inflation.
B)   There is no evidence that countries with more independent central banks have experienced lower rates of economic growth.
C)   There is no evidence that countries with more independent central banks have experienced lower rates unemployment.
D)   There is strong evidence that independent central banks have been better able to deliver low inflation than governments have.
E)   There is strong evidence that governments have been better able to deliver low inflation than independent central banks have.

Question 6

The price stability strategy during the 1980s

Accepted Answer

A)   was a reaffirmation of Keynesian principles.
B)   asserts that the only proper objective of monetary policy was to achieve and maintain a very low and stable rate of inflation.
C)   asserts that the only proper objective of monetary policy was to achieve and maintain a very high but stable rate of inflation.
D)   asserts that the only proper objective of monetary policy was to achieve and maintain a very low even if unstable rate of inflation.
E)   occurred first in Switzerland.

Question 7

Discuss whether and why the behavior of equally independent central banks can substantially differ in both behavior and policy.

Accepted Answer

The answer of Discuss whether and why the behavior of...

Question 8

The most independent central bank in the EU before the creation of the European Central Bank (ECB)was the

Accepted Answer

A)   Bundesbank.
B)   Reichsbank.
C)   Swiss National Bank.
D)   Reserve Bank of Austria.
E)   Bank of England.

Question 9

The two principal criticisms of the state-centered approach to monetary politics are

Accepted Answer

A)   it is more prescriptive than explanatory and it does not answer what incentives for currency strength exist for the people who run independent central banks.
B)   it is more explanatory than prescriptive and it does not answer what incentives for price stability exist for the people who run independent central banks.
C)   it is more prescriptive than explanatory and it does not answer what biases against labor exist for the people who run independent central banks.
D)   it is more prescriptive than explanatory and it does not answer what incentives for price stability exist for the people who run independent central banks.
E)   it is more prescriptive than explanatory and it does not answer what biases for capital savers exist for the people who run independent central banks.

Question 10

According to Oatley's data in chapter 13,which plots data for 1969-1995,the countries with the highest and lowest inflation rates respectively were

Accepted Answer

A)   Norway and Japan.
B)   Italy and Germany.
C)   Britain and Austria.
D)   France and Canada.
E)   Japan and Germany.

Question 11

In today's Europe,the ECB sets interest rates aimed at low inflation and European governments can do little to change the ECB's policy.

Accepted Answer

A) True 
 B)False

Question 12

Governments can easily make credible commitments to low inflation if they want to because of the time-consistency paradox.

Accepted Answer

A) True 
 B)False

Question 13

Discuss and predict why future politics of monetary and exchange=rate policies between elected officials and central banks will be more or less conflictual.

Accepted Answer

The answer of Discuss and predict why future politics of...

Question 14

What is meant by the time-consistency problem and how does it affect a government's commitment to low inflation?

Accepted Answer

The answer of What is meant by the time-consistency problem...

Question 15

According to Figure 13.5,for 1981-1990 for the six countries listed,if we add the inflation rate to the unemployment rate (lowest is best),the country with the lowest score is

Accepted Answer

A)   the United States.
B)   Germany.
C)   France.
D)   Britain.
E)   Japan.

Question 16

According to the data presented in the Oatley book,during the period 1964-1990

Accepted Answer

A)   countries with relatively low inflation rates have experienced no economic growth.
B)   countries with relatively low inflation rates have experienced lower economic growth.
C)   countries with relatively high inflation rates have experienced higher economic growth.
D)   if we exclude Germany, the negative relationship between inflation and economic growth disappears.
E)   if we exclude Japan, the negative relationship between inflation and economic growth disappears.

Question 17

According to the data presented in the Oatley book,there is

Accepted Answer

A)   no evidence that countries with higher inflation experienced stronger economic growth or lower unemployment.
B)   some evidence that countries with higher inflation experienced stronger economic growth or lower unemployment.
C)   no evidence that countries with higher inflation experienced weaker economic growth or lower unemployment.
D)   no evidence that countries with lower inflation experienced weaker economic growth or higher unemployment.
E)   some evidence that countries with lower inflation experienced weaker economic growth or higher unemployment.

Question 18

Governments eventually tried to establish a credible commitment to low inflation by creating independent central banks that tied their hands.

Accepted Answer

A) True 
 B)False

Question 19

According to Figure 13.5,for 1971-1980 for the six countries listed,if we add the inflation rate to the unemployment rate (highest is worst),the United States had an overall score that was

Accepted Answer

A)   highest.
B)   second highest.
C)   third highest.
D)   third lowest.
E)   second lowest.

Question 20

The natural rate of unemployment is the rate of unemployment

Accepted Answer

A)   to which an economy will return after a recession or a boom.
B)   which is determined by the country's minimum wage.
C)   which could be zero.
D)   which cannot be raised by labor market institutions.
E)   which is determined by the rate of inflation.

Exam 13: A State-Centered Approach to Monetary and Exchange-Rate Policies

We need some better explanation for why governments that are supposedly only concerned with short term political gains create central bank institutions whose sole purpose is to raise long-term social welfare.

According to Oatley,

According to Oatley,a good example of a highly independent central bank (1969-1995) is

Which of the following statements is not a function of central bank independence?

According to the data in the Oatley book,which of the following statement is true?

The price stability strategy during the 1980s

Discuss whether and why the behavior of equally independent central banks can substantially differ in both behavior and policy.

The most independent central bank in the EU before the creation of the European Central Bank (ECB) was the

The two principal criticisms of the state-centered approach to monetary politics are

According to Oatley's data in chapter 13,which plots data for 1969-1995,the countries with the highest and lowest inflation rates respectively were

In today's Europe,the ECB sets interest rates aimed at low inflation and European governments can do little to change the ECB's policy.

Governments can easily make credible commitments to low inflation if they want to because of the time-consistency paradox.

Discuss and predict why future politics of monetary and exchange=rate policies between elected officials and central banks will be more or less conflictual.

What is meant by the time-consistency problem and how does it affect a government's commitment to low inflation?

According to Figure 13.5,for 1981-1990 for the six countries listed,if we add the inflation rate to the unemployment rate (lowest is best) ,the country with the lowest score is

According to the data presented in the Oatley book,during the period 1964-1990

According to the data presented in the Oatley book,there is

Governments eventually tried to establish a credible commitment to low inflation by creating independent central banks that tied their hands.

According to Figure 13.5,for 1971-1980 for the six countries listed,if we add the inflation rate to the unemployment rate (highest is worst) ,the United States had an overall score that was

The natural rate of unemployment is the rate of unemployment