ch16final questions

ch16final questions - Chapter 19What Should Central Banks...

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Chapter 19 What Should Central Banks Do?Monetary Policy Goals, Strategy, and Tactics 19.1 The Price Stability Goal and the Nominal Anchor 1) The most common definition that central bankers 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: New 2) Price stability is desirable becauseA) 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 inA) 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: Revised 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: Revised 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 operatingD) an intermediate Answer: A Ques Status: New 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: Revised 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 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
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ch16final questions - Chapter 19What Should Central Banks...

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