the economics of money, banking, and financial markets

(Sean Pound) #1
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  1. Arguments for adopting a policy rule include ____.
    A) the time-inconsistency problem can lead to poor economic outcomes
    B) discretionary policies pursue overly expansionary monetary policies to boost employment in
    the short run but generate higher inflation in the long run
    C) policy makers and politicians cannot be trusted
    D) all of the above
    Answer: D
    Diff: 2 Type: MC Page Ref: 623
    Skill: Recall
    Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
    discretion policy debates




  2. Arguments for adopting a policy rule include ____.
    A) discretion avoids the straightjacket that would lock in the wrong policy if the model that was
    used to derive the policy rule proved to be incorrect
    B) discretion enables policy makers to change policy settings when an economy undergoes
    structural changes
    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
    Answer: C
    Diff: 2 Type: MC Page Ref: 623
    Skill: Recall
    Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
    discretion policy debates




  3. Arguments for discretionary policies include
    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
    Answer: A
    Diff: 2 Type: MC Page Ref: 623 - 624
    Skill: Recall
    Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
    discretion policy debates



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