Question 1

Lucas argues that when policies change, expectations will change thereby ________.

Accepted Answer

A)  changing the relationships in econometric models 
B)  causing the government to abandon its discretionary stance 
C)  forcing the Fed to keep its deliberations secret 
D)  making it easier to predict the effects of policy changes 
A)  changing the relationships in econometric models 
B)  causing the government to abandon its discretionary stance 
C)  forcing the Fed to keep its deliberations secret 
D)  making it easier to predict the effects of policy changes

Question 2

The benefits of a credible nominal anchor include ________.

Accepted Answer

A)  anchors inflation expectations 
B)  preventing the real business cycle from occurring 
C)  encouraging activist policy 
D)  preventing discretion based actions 
A)  anchors inflation expectations 
B)  preventing the real business cycle from occurring 
C)  encouraging activist policy 
D)  preventing discretion based actions

Question 3

The political business cycle can lead to ________.

Accepted Answer

A)  expansionary monetary policy 
B)  expansionary fiscal policy 
C)  corruption 
D)  A and B only 
A)  expansionary monetary policy 
B)  expansionary fiscal policy 
C)  corruption 
D)  A and B only

Question 4

The reason Canada fared differently between the first two oil shocks and the third is because ________.

Accepted Answer

A)  a nominal anchor was in place during the third oil shock in 2007 
B)  by 2007 Canada became a net exporter of oil, so Canadians benefitted from higher oil prices 
C)  in 2007, the global financial crisis overshadowed any oil price shocks 
D)  none of the above 
A)  a nominal anchor was in place during the third oil shock in 2007 
B)  by 2007 Canada became a net exporter of oil, so Canadians benefitted from higher oil prices 
C)  in 2007, the global financial crisis overshadowed any oil price shocks 
D)  none of the above

Question 5

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

Accepted Answer

A)  produce a better outcome 
B)  set inflation equal to zero 
C)  determine the effective interest rate 
D)  prevent financial malfeasance 
A)  produce a better outcome 
B)  set inflation equal to zero 
C)  determine the effective interest rate 
D)  prevent financial malfeasance

Question 6

To bring credibility to the Bank of Canada, Gerald Bouey, the governor created ________.

Accepted Answer

A)  double digit inflation 
B)  two severe recessions in the 1980s 
C)  a reorganization with the Bank of Canada 
D)  a new measure of monetary aggregates 
A)  double digit inflation 
B)  two severe recessions in the 1980s 
C)  a reorganization with the Bank of Canada 
D)  a new measure of monetary aggregates

Question 7

Arguments for discretionary policies include ________.

Accepted Answer

A)  policy rules can be too rigid because they cannot foresee every contingency 
B)  the time-inconsistency problem can lead to poor economic outcomes 
C)  discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run 
D)  all of the above 
A)  policy rules can be too rigid because they cannot foresee every contingency 
B)  the time-inconsistency problem can lead to poor economic outcomes 
C)  discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run 
D)  all of the above

Question 8

Today, most economists ________.

Accepted Answer

A)  accept that expectations formation will change when the behavior of forecasted variables changes 
B)  believe that the Lucas critique has been discredited 
C)  accept the notion that there is no role for discretionary stabilization policy 
D)  believe that having policy credibility is not an important factor to a successful anti-inflation policy 
A)  accept that expectations formation will change when the behavior of forecasted variables changes 
B)  believe that the Lucas critique has been discredited 
C)  accept the notion that there is no role for discretionary stabilization policy 
D)  believe that having policy credibility is not an important factor to a successful anti-inflation policy

Question 9

The opposite of a discretionary approach is a ________ approach.

Accepted Answer

A)  rules based 
B)  activist 
C)  non-activist 
D)  Keynesian 
A)  rules based 
B)  activist 
C)  non-activist 
D)  Keynesian

Question 10

Which of the following formed part of the Bolivian government plan to reduce inflation?

Accepted Answer

A)  Daily balancing of the budget 
B)  Contractionary monetary policy 
C)  Creation of a new currency 
D)  Nationalization of 10 percent of private industrial activity 
A)  Daily balancing of the budget 
B)  Contractionary monetary policy 
C)  Creation of a new currency 
D)  Nationalization of 10 percent of private industrial activity

Lucas argues that when policies change, expectations will change thereby ________.

The benefits of a credible nominal anchor include ________.

The political business cycle can lead to ________.

The reason Canada fared differently between the first two oil shocks and the third is because ________.

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

To bring credibility to the Bank of Canada, Gerald Bouey, the governor created ________.

Arguments for discretionary policies include ________.

Today, most economists ________.

The opposite of a discretionary approach is a ________ approach.

Which of the following formed part of the Bolivian government plan to reduce inflation?

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

Transmission Mechanisms of Monetary Policy

Filters

Exam 25: The Role of Expectations in Monetary Policy

Lucas argues that when policies change, expectations will change thereby ________.

The benefits of a credible nominal anchor include ________.

The political business cycle can lead to ________.

The reason Canada fared differently between the first two oil shocks and the third is because ________.

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

To bring credibility to the Bank of Canada, Gerald Bouey, the governor created ________.

Arguments for discretionary policies include ________.

Today, most economists ________.

The opposite of a discretionary approach is a ________ approach.

Which of the following formed part of the Bolivian government plan to reduce inflation?

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

Transmission Mechanisms of Monetary Policy

Filters