Exam 27: Transmission Mechanisms of Monetary Policy

When the ________ has an interest rate target,________ output might lead to a ________ money supply.

Monetarists contend that the channels of monetary influence in Keynesian structural models are too ________ defined,________ the importance of monetary policy.

Using ________ we can predict how ________ changes may affect the link between M and Y.

Explain how expansionary and contractionary monetary policies affect aggregate demand through the exchange rate channel.

Monetarists claim that ________ models ignore important transmission mechanisms and therefore ________ the importance of the effects of monetary policy on the economy.

According to Tobin's q theory,when equity prices are low the market price of existing capital is ________ relative to new capital,so expenditure on fixed investment is ________.

Friedman and Schwartz found that the rate of money growth fell prior to business cycle downturns in ________.

According to Tobin's q theory,when equity prices are high the market price of existing capital is ________ relative to new capital,so expenditure on fixed investment is ________.

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy.These lessons include:

A(n)________ of reduced-form evidence is that it cannot rule out ________.

What is reverse causation and how does it relate to reduced-form evidence on monetary policy transmission?

Recent Japanese experience has been characterized by tight monetary policy,as indicated by ________.

An expansionary monetary policy may cause asset prices to rise,thereby reducing the likelihood of financial distress and causing consumer durable and housing expenditures to rise.This monetary transmission mechanism is referred to as ________.

Explain the traditional interest-rate channel for expansionary monetary policy.Explain how a tight monetary policy affects the economy through this channel.

A contractionary monetary policy raises the real interest rate,causing the domestic currency to ________,thereby ________ net exports.

Economic theory suggests that ________ interest rates are ________ important than ________ interest rates in explaining investment behavior.

Early Keynesians believed that low ________ during the Great Depression indicated that ________ policy was easy.

The ________ held the view that monetary policy does not matter at all for movements in aggregate output.

A disadvantage of ________ evidence is that it cannot rule out ________.

By the standard of low-grade bonds,interest rates were ________ and monetary policy was ________ during the Great Depression.