ch13 - The Economics of Money, Banking, and Financial...

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The Economics of Money, Banking, and Financial Markets, 9e (Mishkin) - Global Edition Economics of Money, Banking, and Fin. Mkts., 2e (B.S. Ed.) (Mishkin) – Global Edition Chapter 1 6 3 Central Banks and the Federal Reserve System 1 6 3 .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. Answer: D Ques Status: Revised 2) Price stability is desirable because A) inflation creates uncertainty, making it difficult to plan for the future. B) everyone is better off when prices are stable. C) price stability increases the profitability of the Fed. D) it guarantees full employment. Answer: A Ques Status: Previous Edition 3) 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. Answer: D Ques Status: Previous Edition 4) Economists believe that countries recently suffering hyperinflation have experienced A) reduced growth. B) increased growth. C) reduced prices. D) lower interest rates. Answer: A Ques Status: Previous Edition 5) 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 Answer: A Ques Status: Previous Edition 1
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6) 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. Answer: A Ques Status: Previous Edition 7) A central feature of monetary policy strategies in all countries is the use of a nominal anchor, which is a nominal variable that monetary policymakers use as an A) operating target, such as the federal funds interest rate. B) intermediate target, such as the federal funds interest rate. C) intermediate target to achieve an ultimate goal such as price stability. D) operating target to achieve an ultimate goal such as exchange rate stability. Answer: C Ques Status: Previous Edition 8) A nominal anchor promotes price stability by A) outlawing inflation. B) stabilizing interest rates. C) keeping inflation expectations low. D) keeping economic growth low. Answer: C Ques Status: Previous Edition 9) 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
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This note was uploaded on 11/23/2011 for the course FIN 243 taught by Professor Jw during the Spring '11 term at Hong Kong Shue Yan.

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ch13 - The Economics of Money, Banking, and Financial...

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