Economics Questions

Under Alan Greenspan and Ben Bernanke, the Federal Reserve was successful in pursuing a ________ policy.A) preemptiveB) inflation targetingC) exchange rate targetingD) monetary targeting

Suppose it takes roughly two years for monetary policy to have a significant impact on inflation. If inflation is currently low but policymakers believe inflation will rise over the next two years with an unchanged stance of monetary policy, when should they tighten monetary policy to prevent the inflationary surge?A) nowB) wait until overt signs of inflation appearC) next yearD) two years later

Which set of goals can, at times, conflict in the short run?A) high employment and economic growthB) interest rate stability and financial market stabilityC) high employment and price level stabilityD) exchange rate stability and financial market stability

The mandate for the monetary policy goals that has been given to the Federal Reserve System is an example of a ________ mandate.A) primaryB) dualC) secondaryD) hierarchical

Foreign exchange rate stability is important because a decline in the value of the domestic currency will ________ the inflation rate, and an increase in the value of the domestic currency makes domestic industries ________ competitive with competing foreign industries.A) increase; moreB) increase; lessC) decrease; moreD) decrease; less

The Federal Reserve System was created toA) make it easier to finance budget deficits.B) promote financial market stability.C) lower the unemployment rate.D) promote rapid economic growth.

The primary goal of the European Central Bank isA) price stability.B) exchange rate stability.C) interest rate stability.D) high employment.

Either a dual or hierarchial mandate is acceptable as long as ________ is the primary goal in the ________.A) price stability; short runB) price stability; long runC) reducing business-cycle fluctuations; short runD) reducing business-cycle fluctuations; long run

The mandate for the monetary policy goals that has been given to the European Central Bank is an example of a ________ mandate.A) primaryB) dualC) secondaryD) hierarchical

The type of monetary policy that is used in Canada, New Zealand, and the United Kingdom isA) monetary targeting.B) inflation targeting.C) targeting with an implicit nominal anchor.D) interest-rate targeting.

Supply-side economic policies seek toA) raise interest rates through contractionary monetary policy.B) increase federal government expenditures.C) increase consumption expenditures by increasing taxes.D) increase saving and investment using tax incentives.

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 nominalA) anchor.B) benchmark.C) tether.D) guideline.

The time-inconsistency problem in monetary policy can occur when the central bank conducts policyA) using a nominal anchor.B) using a strict and inflexible rule.C) on a discretionary, day-by-day basis.D) using a flexible, discretionary rule.

If the central bank pursues a monetary policy that is more expansionary than what firms and people expect, then the central bank must be trying toA) boost output in the short run.B) constrain output in the short run.C) constrain prices.D) boost prices in the short run.

Monetary policy is considered time-inconsistent becauseA) 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.

The theory that monetary policy conducted on a discretionary, day-by-day basis leads to poor long-run outcomes is referred to as theA) adverse selection problem.B) moral hazard problem.C) time-inconsistency problem.D) nominal-anchor problem.

Economists believe that countries recently suffering hyperinflation have experiencedA) reduced growth.B) increased growth.C) reduced prices.D) lower interest rates.

A nominal anchor promotes price stability byA) outlawing inflation.B) stabilizing interest rates.C) keeping inflation expectations low.D) keeping economic growth low.

The most common definition that monetary policymakers use for price stability isA) low and stable deflation.B) an inflation rate of zero percent.C) high and stable inflation.D) low and stable inflation.

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 rateB) unemployment rateC) interest rateD) foreign exchange rate