the economics of money, banking, and financial markets

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Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 18 The Conduct of Monetary Policy: Strategy and Tactics

18.1 The Price Stability Goal and the Nominal Anchor

1. 
   

   Price stability is defined as ____.
   A) low inflation
   B) low and stable inflation
   C) stable inflation
   D) core inflation
   Answer: B
   Diff: 1 Type: MC Page Ref: 438
   Skill: Recall
   Objective List: 18.1 Assess the different types of monetary policy strategy

   
   


2. 
   

   The importance of a nominal anchor is to ____.
   A) limit the time-inconsistency problem
   B) reduce inflation
   C) promote low inflation
   D) allow discretionary day-to-day monetary policy
   Answer: A
   Diff: 1 Type: MC Page Ref: 439
   Skill: Recall
   Objective List: 18.1 Assess the different types of monetary policy strategy

   
   


3. 
   

   Inflation leads to ____.
   A) price instability
   B) lower economic growth
   C) public hostility
   D) all of the above
   Answer: D
   Diff: 1 Type: MC Page Ref: 439
   Skill: Recall
   Objective List: 18.1 Assess the different types of monetary policy strategy

   
   


4. 
   

   The nominal anchor ____.
   A) acts like behavioural rule
   B) leads to inflation
   C) creates the time-inconsistency problem
   D) avoids the natural rate of unemployment
   Answer: A
   Diff: 1 Type: MC Page Ref: 440
   Skill: Recall
   Objective List: 18.1 Assess the different types of monetary policy strategy