Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280601
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 15, Problem 3TY
To determine
To evaluate: The argument that satisfies the meaning of discretionary policy and rules.
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This question below addresses whether monetary policy should be discretionary or be implemented following a set of rules.
Which of the following statements argues against discretionary monetary policy? Check all that apply.
-It is impossible for a policy rule to consider all the possible scenarios and specify, in advance, the right policy response. It is better to appoint qualified individuals who will respond to any situation as best they can.
-Discretionary monetary policy may lead to a higher sacrifice ratio because the public is not confident that the Federal Reserve will keep inflation low.
-Monetary rules reduce the flexibility of the Federal Reserve.
-The Federal Reserve may use monetary policy to affect the outcome of elections.
Targeting the federal funds rate ( is, is not ) as important a tool today as it was before the 2007-2009 financial crisis. During the financial crisis when the federal funds rate was near zero, the Fed ( did, did not ) wish to go lower than zero and came up with alternatives to influence interest rates and lending: the administered rates. Today, the Fed still sets a target for the federal funds rate but finds it more effective to change the administered rates. By doing that, the Fed can stimulate or restrict lending. The federal funds rate is the Feds policy rate and (is, is not ) useful when providing forward guidance.
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Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
Why is the shape of the aggregate supply curve important to the Keynesian-monetarist controversy? (Hint: Review Exhibit 6 of Chapter 26 in the chapter on aggregate demand and supply.
Chapter 15 Solutions
Macroeconomics: Principles and Policy (MindTap Course List)
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- Which of the following statements is true about joint optimal fiscal and monetary policy? "Despite the need to raise government revenue in non-lump-sum manner:" (a) obtaining economic efficiency along the consumption—leisure margin, is a goal more important in optimal macroeconomic policy, more so than achieving efficiency along the consumption-money margin. (b) obtaining economic efficiency along the consumption—money margin, is a goal more important in optimal macroeconomic policy, more so than achieving efficiency along the consumption-leisure margin. (c) obtaining economic efficiency along the consumption—money margin, is a goal equal as important in optimal macroeconomic policy, as achieving efficiency along the consumption-leisure margin. (d) None of the above.arrow_forwardCompare and contrast Classical, Keynesian and Monetarists approaches to monetary policy.arrow_forwardWhich of the following statements is false? It might sometimes make sense for a government to combine an expansionary monetary policy with an expansionary fiscal policy. If spending is very responsive to changes in interest rates, and the demand for money is interest inelastic, then monetary policy tends to be more powerful than fiscal policy. It would never make sense for a government to combine an expansionary monetary policy with a contractionary fiscal policy. If spending is not very responsive to changes in interest rates, and the demand for money is interest elastic, then fiscal policy tends to be more powerful than monetary policyarrow_forward
- When both fiscal policy and monetary policy are stimulative, we expect the yield curve to be _______ in shape. flat very steep moderately steep invertedarrow_forwardFederal expenditures and tax revenues that automatically change throughout the business cycle in such a way as to help stabilise an economic expansion or contraction are known as: Select one: a. good federal governance. b. self-perpetuating monetary policy. c. automatic stabilisers. d. self-perpetuating fiscal policy.arrow_forwardAssume that the prevailing interest rate in this economy is 6%. If the central bank decides to reduce the interest rate to 4% then: (a) This is contractionary monetary policy action and the price of exports would increase; (b) This is expansionary monetary policy and exports would increase; (c) This is expansionary fiscal policy and imports will increase; (d) This is contractionary monetary policy and imports will decrease.arrow_forward
- Assuming a constant money supply, government expenditures can be financed by which of the following? Check all that apply. Borrowing Money supply Interest rate Taxesarrow_forwardIdentify each item as Fiscal or Monetary Policy, or Botharrow_forward41. Which of the following definitions is INCORRECT? Group of answer choices Administrative lag: The time it takes to administer a policy Operational lag: outside lag: The time it takes for policy to be effective. Administrative lag: The time it takes for policy to be effective Recognition lag: the time it takes to recognize that a business cycle has started.arrow_forward
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