Article Summary In a September 2013 speech to the Independent Bankers Association of Texas, Federal Reserve Bank of Dallas president Richard Fisher stated that the Fed's credibility was harmed when it announced the previous week that it would continue its large bond purchasing program. In June, Fed Chairman Ben Bernanke had stated that that the program could begin to be cut back later in the year, and several other Fed officials expressed being open to the announced timing of this policy. Bernanke's change in his announced timeline of the Fed's intentions regarding the bond purchasing program brought criticism that the Fed had misled investors. In his speech, Fisher stated "I disagreed with the decision of the committee and argued against it. Doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question. I believe that is exactly what has occurred, though I take no pleasure in saying so." Fisher has been a long-time opponent of the Fed's bond purchasing program, claiming it is ineffective and may well lead to future inflation, and had been calling for the Fed to begin phasing out this program in September. Source: "Fisher: Standing pat on policy hurt Fed's credibility," Reuters, September 23, 2013. 43) Refer to the Article Summary. Richard Fisher brought the Fed's credibility into question when it decided to continue with its bond purchasing program despite leading many to believe that the program would begin to be phased out. Prior to this, over the past two decades whenever a change in Fed policy had been announced, the change has ________ taken place, leading to ________ credibility. A) rarely; greater B) actually; greater C) rarely; less D) actually; less 44) Refer to the Article Summary. If the Federal Reserve's announcements about upcoming monetary policy decisions are not seen as credible, as Richard Fisher alludes to regarding the announcements about the bond purchasing program, which of the following would you expect to see? A) Inflation expectations will accurately reflect actual inflation. B) Expansionary monetary policy will result in lower rates of inflation. C) Firms and workers will be unable to accurately forecast changes in the rate of inflation. D) The Federal Reserve will have more control over the inflation rate. 45) When a central bank works makes joint decisions with the government's Treasury department, A) the central bank risks losing credibility. B) the central bank is asserting its independence. C) the government enhances its credibility. D) the government loses its ability to conduct fiscal policy. 46) One problem with deflation is that it can raise the real value of debt. 47) If inflation falls from 11% to 5%, there is deflation. 48) The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment. 49) In face of a negative supply shock, the Fed may avoid a rise in unemployment only if it is willing to increase the rate of inflation. 50) Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.
Article Summary
In a September 2013 speech to the Independent Bankers Association of Texas, Federal Reserve Bank of Dallas president Richard Fisher stated that the Fed's credibility was harmed when it announced the previous week that it would continue its large bond purchasing program. In June, Fed Chairman Ben Bernanke had stated that that the program could begin to be cut back later in the year, and several other Fed officials expressed being open to the announced timing of this policy. Bernanke's change in his announced timeline of the Fed's intentions regarding the bond purchasing program brought criticism that the Fed had misled investors. In his speech, Fisher stated "I disagreed with the decision of the committee and argued against it. Doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question. I believe that is exactly what has occurred, though I take no pleasure in saying so." Fisher has been a long-time opponent of the Fed's bond purchasing program, claiming it is ineffective and may well lead to future inflation, and had been calling for the Fed to begin phasing out this program in September.
Source: "Fisher: Standing pat on policy hurt Fed's credibility," Reuters, September 23, 2013.
43) Refer to the Article Summary. Richard Fisher brought the Fed's credibility into question when it decided to continue with its bond purchasing program despite leading many to believe that the program would begin to be phased out. Prior to this, over the past two decades whenever a change in Fed policy had been announced, the change has ________ taken place, leading to ________ credibility.
A) rarely; greater
B) actually; greater
C) rarely; less
D) actually; less
44) Refer to the Article Summary. If the Federal Reserve's announcements about upcoming
A) Inflation expectations will accurately reflect actual inflation.
B) Expansionary monetary policy will result in lower rates of inflation.
C) Firms and workers will be unable to accurately
D) The Federal Reserve will have more control over the inflation rate.
45) When a central bank works makes joint decisions with the government's Treasury department,
A) the central bank risks losing credibility.
B) the central bank is asserting its independence.
C) the government enhances its credibility.
D) the government loses its ability to conduct fiscal policy.
46) One problem with deflation is that it can raise the real value of debt.
47) If inflation falls from 11% to 5%, there is deflation.
48) The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment.
49) In face of a negative supply shock, the Fed may avoid a rise in
50) Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the economy was growing at a brisk pace by setting and hitting low money supply growth rate targets.
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