In this chapter we discussed the policy decisions that central banks can make to return an economy back to a stable equilibrium whenever there is an outside shock. The policy choices are straightforward and can be decided on directly by the central bank. Why then do central banks not do a better job of keeping economies near a stable equilibrium all the time? Since this is hard to observe, we need to rely on inflation to get an as our guide. One issue that arises is that in real life it is very hard to know the true level of idea of where the economy is. When doing this, we focus on the The central bank can have a hard time adjusting the economy appropriately because OA. even though central banks can determine the state of the economy easily, and the economy responds to policy decisions quickly, the policy decisions made by central banks are consistently incorrect. B. the economy usually responds too quickly to policy decisions and there is a lot of "noise" in the economy, making it hard to know precise relationships between variables. OC. there is a lag in how long it takes the economy to respond to policy decisions and there is a lot of "noise" in the economy, making it hard to know precise relationships between variables. OD. even though central banks can determine the state of the economy easily, they usually do not have the long-run health of the economy as their main goal.
In this chapter we discussed the policy decisions that central banks can make to return an economy back to a stable equilibrium whenever there is an outside shock. The policy choices are straightforward and can be decided on directly by the central bank. Why then do central banks not do a better job of keeping economies near a stable equilibrium all the time? Since this is hard to observe, we need to rely on inflation to get an as our guide. One issue that arises is that in real life it is very hard to know the true level of idea of where the economy is. When doing this, we focus on the The central bank can have a hard time adjusting the economy appropriately because OA. even though central banks can determine the state of the economy easily, and the economy responds to policy decisions quickly, the policy decisions made by central banks are consistently incorrect. B. the economy usually responds too quickly to policy decisions and there is a lot of "noise" in the economy, making it hard to know precise relationships between variables. OC. there is a lag in how long it takes the economy to respond to policy decisions and there is a lot of "noise" in the economy, making it hard to know precise relationships between variables. OD. even though central banks can determine the state of the economy easily, they usually do not have the long-run health of the economy as their main goal.
Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical
Section: Chapter Questions
Problem 8E
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Transcribed Image Text:In this chapter we discussed the policy decisions that central banks can make to return an economy back to a stable equilibrium whenever there is an outside shock.
The policy choices are straightforward and can be decided on directly by the central bank.
Why then do central banks not do a better job of keeping economies near a stable equilibrium all the time?
One issue that arises is that in real life it is very hard to know the true level of
idea of where the economy is. When doing this, we focus on the
The central bank can have a hard time adjusting the economy appropriately because
OA. even though central banks can determine the state of the economy easily, and the economy responds to policy decisions quickly, the policy decisions made
by central banks are consistently incorrect.
Since this is hard to observe, we need to rely on inflation to get an
as our guide.
B. the economy usually responds too quickly to policy decisions and there is a lot of "noise" in the economy, making it hard to know precise relationships
between variables.
OC. there is a lag in how long it takes the economy to respond to policy decisions and there is a lot of "noise" in the economy, making it hard to know precise
relationships between variables.
OD. even though central banks can determine the state of the economy easily, they usually do not have the long-run health of the economy as their main goal.
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