Exam 25: The Role of Expectations in Monetary Policy

Arguments for discretionary policies include ________.

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

An example of a negative aggregate demand shock is ________.

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

Describe discretionary and nondiscretionary policy in the case of a negative aggregate supply shock to the economy. Use a graph to support your answer.

The 1981-1982 recession yielded an unemployment rate of ________.

A negative aggregate demand shock will only impact ________.

The Lucas critique indicates that ________.

After the first two oil price shocks ________.

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

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

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

The rational expectations hypothesis implies that when macroeconomic policy changes, ________.

When expectations of inflation are formed rationally, an anti-inflationary policy will be more successful if it is ________.

Prior to 1980, Canada's inflation rate ________.

Advocates of nondiscretionary policy emphasize the importance of a constant money growth rate rule more than the balanced-budget amendment or restrictions on union power because ________.

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

The notion of hiring central bankers who are "conservative" and have a strong aversion to inflation was introduced by ________.

The global economic crisis that arose in October 2008 was the result of ________.

Describe how a nominal anchor can help a central bank achieve credibility.