538 $
© 2014 Pearson Canada Inc.$- Describe the time-inconsistency problem as it pertains to monetary policy outcomes.
Answer: The time-inconsistency problem occurs when monetary policymakers are tempted to
pursue a discretionary monetary policy that is more expansionary than firms or people expect
because such a policy would boost economic output (or lower employment) in the short run.
Diff: 1 Type: SA Page Ref: 429
Skill: Recall
Objective List: 18.2 List the advantages and disadvantages of inflation targeting
18.2 Other Goals of Monetary Policy
The natural rate of unemployment ____.
A) is consistent with full employment
B) is equal to zero
C) equals structural employment
D) is the same as frictional employment
Answer: A
Diff: 1 Type: MC Page Ref: 440
Skill: Recall
Objective List: 18.1 Assess the different types of monetary policy strategy
High unemployment ____.
A) results in lower GDP
B) leads to increased human misery
C) cannot be a target of monetary policy
D) A and B only
Answer: D
Diff: 1 Type: MC Page Ref: 440
Skill: Recall
Objective List: 18.1 Assess the different types of monetary policy strategy
Current estimates of NAIRU place it between ____ and ____.
A) 4 percent; 6 percent
B) 4 percent; 20 percent
C) 1 percent; 3 percent
D) 1 percent; 4 percent
Answer: A
Diff: 1 Type: MC Page Ref: 440
Skill: Recall
Objective List: 18.2 List the advantages and disadvantages of inflation targeting