19.1 The Price Stability Goal and The Nominal Anchor 1) The most common definition that monetary policymakers use for price stability is A) low and stable deflation. B) an inflation rate of zero percent. C) high and stable inflation. D) low and stable inflation. 2) Inflation results in A) ease of planning for the future. B) ease of comparing prices over time. C) lower nominal interest rates. D) difficulty interpreting relative price movements. 3) Economists believe that countries recently suffering hyperinflation have experienced A) reduced growth. B) increased growth. C) reduced prices. D) lower interest rates. 4) A nominal variable, such as the inflation rate or the money supply, which ties down the price level to achieve price stability is called ________ anchor. A) a nominal B) a real C) an operating D) an intermediate 5) A central feature of monetary policy strategies in all countries is the use of a nominal variable that monetary policymakers use as an intermediate target to achieve an ultimate goal such as price stability. Such a variable is called a nominal A) anchor. B) benchmark. C) tether. D) guideline. 6) A nominal anchor promotes price stability by A) outlawing inflation. B) stabilizing interest rates. C) keeping inflation expectations low. D) keeping economic growth low. 7) Monetary policy is considered time-inconsistent because A) of the lag times associated with the implementation of monetary policy and its effect on the economy. B) policymakers are tempted to pursue discretionary policy that is more contractionary in the short run. C) policymakers are tempted to pursue discretionary policy that is more expansionary in the short run. D) of the lag times associated with the recognition of a potential economic problem and the implementation of monetary policy. 8) The time-inconsistency problem with monetary policy tells us that, if policymakers use discretionary policy, there is a higher probability that the ________ will be higher, compared to policy makers following a behavior rule. A) inflation rate B) unemployment rate C) interest rate D) foreign exchange rate 9) The theory that monetary policy conducted on a discretionary, day-by-day basis leads to poor long-run outcomes is referred to as the A) adverse selection problem. B) moral hazard problem. C) time-inconsistency problem. D) nominal-anchor problem. 10) The ________ problem of discretionary policy arises because economic behavior is influenced by what firms and people expect the monetary authorities to do in the future. A) moral hazard B) time-inconsistency C) nominal-anchor D
19.1 The Price Stability Goal and The Nominal Anchor
1) The most common definition that monetary policymakers use for price stability is
A) low and stable deflation.
B) an inflation rate of zero percent.
C) high and stable inflation.
D) low and stable inflation.
2) Inflation results in
A) ease of planning for the future.
B) ease of comparing prices over time.
C) lower nominal interest rates.
D) difficulty interpreting relative price movements.
3) Economists believe that countries recently suffering hyperinflation have experienced
A) reduced growth.
B) increased growth.
C) reduced prices.
D) lower interest rates.
4) A nominal variable, such as the inflation rate or the money supply, which ties down the price level to achieve price stability is called ________ anchor.
A) a nominal
B) a real
C) an operating
D) an intermediate
5) A central feature of
A) anchor.
B) benchmark.
C) tether.
D) guideline.
6) A nominal anchor promotes price stability by
A) outlawing inflation.
B) stabilizing interest rates.
C) keeping inflation expectations low.
D) keeping
7) Monetary policy is considered time-inconsistent because
A) of the lag times associated with the implementation of monetary policy and its effect on the economy.
B) policymakers are tempted to pursue discretionary policy that is more contractionary in the short run.
C) policymakers are tempted to pursue discretionary policy that is more expansionary in the short run.
D) of the lag times associated with the recognition of a potential economic problem and the implementation of monetary policy.
8) The time-inconsistency problem with monetary policy tells us that, if policymakers use discretionary policy, there is a higher probability that the ________ will be higher, compared to policy makers following a behavior rule.
A) inflation rate
B)
C) interest rate
D) foreign exchange rate
9) The theory that monetary policy conducted on a discretionary, day-by-day basis leads to poor long-run outcomes is referred to as the
A) adverse selection problem.
B) moral hazard problem.
C) time-inconsistency problem.
D) nominal-anchor problem.
10) The ________ problem of discretionary policy arises because economic behavior is influenced by what firms and people expect the monetary authorities to do in the future.
A) moral hazard
B) time-inconsistency
C) nominal-anchor
D
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