Exam 25: The Role of Expectations in Monetary Policy

________ imposes a conceptual structure and inherent discipline on policy makers, but without eliminating all flexibility.

The New Economic Policy implemented by the Bolivian government to reduce inflation, resulted in a output loss of ________ percent of GDP.

With a negative aggregate demand shock, monetary policy credibility can ________.

According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, then ________.

Between 1981 and 1981, Canada experienced ________.

An example of a rule used in non-discretionary monetary policy is ________.

Approaches to establishing central bank credibility include ________.

Milton Friedman and his followers are known as ________.

One of the drawbacks of rules based monetary policy is ________.

A credible nominal anchor ________.

It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the public knows that large deficits ________.

Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target. But if the commitment is not credible, then ________.

The best way to keep inflation under control is to ________.

The time inconsistency problem means that policy makers are always tempted to pursue ________ policy in the short run.

Some economists contend that a policy of shifting the aggregate demand curve will be costly because it produces more volatility in both the price level and output. These economists likely are advocates of ________ policy.

Approaches to establishing central bank credibility include ________.

The difference in outcomes occurring with a credible nominal anchor and without one, given a positive aggregate demand shock is that ________.

Which of the following components is not included in the equation for the short-run aggregate supply curve?

One of the drawbacks of rules based monetary policy is ________.

Whether one views the discretionary policies of the 1960s and 1970s as destabilizing or believes the economy would have been less stable without these policies, most economists agree that ________.