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Chapter 21 Monetary Policy Strategy: The International Experience

Multiple Choice
)1 Overly expansionary monetary policy ()a leads to high inflation. ()b decreases the efficiency of the economy. ()c hampers economic growth. ()d does all of the above. ()e does only (a) and (b) of the above. Answer: Question tatus: !revious "dition )# Overly expansionary monetary policy ()f leads to high inflation. ()g can produce serious recessions. ()h leads to deflation. ()i does all of the above. ()$ does only (a) and (b) of the above. Answer: Question tatus: !revious "dition )% Overly expansionary monetary policy ()& decreases the efficiency of the economy. ()l hampers economic growth. ()m leads to deflation. ()n all of the above. ()o does only (a) and (b) of the above. Answer: Question tatus: !revious "dition

#''(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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Overly expansionary monetary policy ()p leads to deflation. (), decreases the efficiency of the economy. ()r can produce serious recessions. ()s does all of the above. ()t does only (a) and (b) of the above. Answer: Question tatus: !revious "dition

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)onetary policy that is too tight can ()u produce serious recessions in which output falls and unemployment rises. ()v lead to deflation- which- in turn- can help trigger financial crises. ()w lead to inflation- which decreases the efficiency of the economy. ()x do all of the above. ()y do only (a) and (b) of the above. Answer: Question tatus: !revious "dition

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)onetary policy that is too tight can ()/ produce serious recessions in which output falls and unemployment rises. ()aalead to inflation- which- in turn- can help trigger financial crises. ()bb lead to inflation- which decreases the efficiency of the economy. ()ccdo all of the above. ()dd do only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)0

A central feature of monetary policy strategies in all countries is the use of a nominal variable that monetary policyma&ers use as an intermediate target to achieve an ultimate goal such as price stability. uch a variable is called a nominal ()eeanchor. ()ff benchmar&. ()gg tether. ()hh guideline. Answer: Question tatus: !revious "dition

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A central feature of monetary policy strategies in all countries is the use of a nominal anchor- which is a nominal variable that monetary policyma&ers use as ()ii an operating target- such as the federal funds interest rate. ()$$ an intermediate target- such as the federal funds interest rate. ()&& an intermediate target to achieve an ultimate goal such as price stability. ()ll an operating target to achieve an ultimate goal such as exchange rate stability. Answer: Question tatus: !revious "dition

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #'.

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A nominal anchor ()mm is a necessary element in successful monetary policy strategies. ()nn is a nominal variable that monetary policyma&ers use as intermediate target to achieve an ultimate goal such as price stability. ()oo forces a nation6s monetary authority to &eep the price level from growing or falling too fast. ()pp is all of the above. (),, is only (a) and (b) of the above. Answer: Question tatus: !revious "dition

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A nominal anchor ()rr can help promote price stability. ()ss is a necessary element in successful monetary policy strategies. ()tt forces a nation6s monetary authority to &eep the price level from growing or falling too fast. ()uu can do all of the above. ()vv can do only (a) and (b) of the above. Answer: Question tatus: !revious "dition

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"conomic variables that can serve as a nominal anchor for monetary policy include ()ww the exchange rate. ()xx the inflation rate. ()yy the federal budget deficit. ()//all of the above. ()aaa both (a) and (b) of the above. Answer: Question tatus: 8ew

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"conomic variables that can serve as a nominal anchor for monetary policy include ()bbb the exchange rate. ()ccc the inflation rate. ()ddd the money supply. ()eee all of the above. ()fff both (a) and (b) of the above. Answer: Question tatus: 8ew

)1%

"conomic variables that can serve as a nominal anchor for monetary policy include ()ggg the unemployment rate. ()hhh the inflation rate. ()iii the federal budget deficit. ()$$$ all of the above. ()&&& both (a) and (b) of the above. Answer: Question tatus: 8ew

#'0(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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A nominal anchor promotes price stability by ()lll outlawing inflation. ()mmm stabili/ing interest rates. ()nnn &eeping inflation expectations low. ()ooo &eeping economic growth low. ()ppp all of the above. Answer: Question tatus: 8ew

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3he theory that monetary policy conducted on a discretionary- day9by9day basis leads to poor long9 run outcomes is referred to as the (),,, adverse selection problem. ()rrr moral ha/ard problem. ()sss time9consistency problem. ()ttt nominal9anchor problem. Answer: Question tatus: :evised

)1.

3he ;;;;; problem of discretionary policy arises because economic behavior is influenced by what firms and people expect the monetary authorities to do in the future. ()uuu moral ha/ard ()vvv time9consistency ()www nominal9anchor ()xxx rational9expectation Answer: Question tatus: :evised

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4f the central ban& pursues a monetary policy that is more expansionary than what firms and people expect- then the central ban& must be trying to ()yyy boost output in the short run. ()/// constrain output in the short run. ()aaaa constrain prices. ()bbbb boost prices in the short run. Answer: Question tatus: !revious "dition

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3he time9consistency problem in monetary policy can occur when the central ban& conducts policy ()cccc using a nominal anchor. ()dddd using a strict and an inflexible rule. ()eeee on a discretionary- day9by9day basis. ()ffff using a flexible- discretionary rule. Answer: Question tatus: :evised

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #'1

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4n the face of rising unemployment- a central ban& that conducts monetary policy on a discretionaryday9by9day basis may be tempted to pursue monetary policy that is more expansionary than they had announced. 4f the policy leads to high inflation with no reduction in unemployment it is because ()gggg wor&ers and firms- &nowing that the central ban& has discretion- raised their expectations of prices- wages- and inflation. ()hhhh the monetary anchor proved to be an inaccurate indicator of the direction of inflation. ()iiii of both of the above reasons. ()$$$$ of neither of the above reasons< it was simply bad luc&. Answer: Question tatus: !revious "dition

)#7

A professor tells his students that if they do not do well on the midterm exam- he will assign a ten9 page research paper. tudents are li&ely to be s&eptical because ()&&&& they &now that the professor may renege to avoid the extra wor& of grading the papers. ()llll they have been covering moral ha/ard and adverse selection problems in financial mar&ets. ()mmmm of both of the above reasons. ()nnnn of neither of the above reasons. Answer: Question tatus: !revious "dition

)#1

3he discrepancy between announcements (what policyma&ers say they are going to do) and actions (what they subse,uently in fact do) is called ()oooo moral ha/ard. ()pppp bait9and9switch. (),,,, time consistency. ()rrrr nominal9anchor consistency. Answer: Question tatus: :evised

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4f the central ban& conducts monetary policy on a discretionary- day9by9day basis and announces a policy of low inflation ()ssss wor&ers and firms will almost certainly believe the announcement- because they &now that the central ban& does not want to lose credibility. ()tttt wor&ers and firms will li&ely doubt the announcement- because they &now that the central ban& does not want to lose credibility. ()uuuu wor&ers and firms will be s&eptical of the announcement- because they &now that the central ban& may want to renege if economic conditions change. ()vvvv wor&ers and firms will not believe the announcement- because they &now that the central ban& will not want low inflation if unemployment rises. Answer: Question tatus: :evised

#'5(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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A central ban& may pursue a discretionary policy resulting in high inflation ()wwww because a low9inflation policy is not desirable. ()xxxx in response to political pressure. ()yyyy because a high9inflation policy increases output. ()//// all of the above. ()aaaaa both (a) and (c) of the above. Answer: Question tatus: 8ew

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A central ban& may pursue a discretionary policy resulting in high inflation ()bbbbb because central ban&s thin& this policy will lower unemployment. ()ccccc in response to political pressure. ()ddddd because a high9inflation policy increases output. ()eeeee all of the above. ()fffff both (a) and (b) of the above. Answer: Question tatus: 8ew

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3argeting the exchange rate can ta&e the form of fixing the value of the domestic currency ()ggggg to a commodity such as gold. ()hhhhh to that of a large- low9inflation country. ()iiiii to that of a country that has a higher inflation rate than the domestic country. ()$$$$$ to any of the above. ()&&&&& to only (a) and (b) of the above. Answer: Question tatus: !revious "dition

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=nder an exchange9rate targeting rule for monetary policy- a crawling peg ()lllll fixes the value of the domestic currency to a commodity such as gold. ()mmmmm fixes the value of the domestic currency to that of a large- low9inflation country. ()nnnnn allows the domestic currency to depreciate at steady rate so that inflation in the pegging country can be higher than that of the anchor country. ()ooooo allows the domestic currency to depreciate at steady rate so that inflation in the pegging country can be lower than that of the anchor country. Answer: Question tatus: !revious "dition

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #.7

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Advantages of exchange9rate targeting include: ()ppppp 3he nominal anchor of an exchange9rate target directly contributes to &eeping inflation under control by tying the inflation rate for internationally traded goods to that found in the anchor country. (),,,,, An exchange9rate target provides an automatic rule for the conduct of monetary policy that helps mitigate the time9consistency problem. ()rrrrr An exchange9rate target has the advantage of simplicity and clarity- as it is easily understood by the public. ()sssss All of the above. ()ttttt Only (a) and (b) of the above. Answer: Question tatus: :evised

)#1

Advantages of exchange9rate targeting include: ()uuuuu 4f it is credible- the exchange9rate target anchors inflation expectations to the inflation rate in the anchor country. ()vvvvv An exchange9rate target forces a tightening of monetary policy when there is a tendency for the domestic currency to depreciate or a loosening of policy when there is a tendency for the domestic currency to appreciate- so that discretionary- time9consistent policy is less of an option. ()wwwww An exchange9rate target has the advantage of leaving the country less open to a speculative attac& on its currency. ()xxxxx All of the above. ()yyyyy Only (a) and (b) of the above. Answer: Question tatus: :evised

)#5

Advantages of exchange9rate targeting include: ()///// An exchange9rate target provides an automatic rule for the conduct of monetary policy that helps mitigate the time9consistency problem. ()aaaaaa An exchange9rate target has the advantage of simplicity and clarity- as it is easily understood by the public. ()bbbbbb An exchange9rate target has the advantage of leaving the country less open to a speculative attac& on its currency. ()cccccc All of the above. ()dddddd Only (a) and (b) of the above. Answer: Question tatus: :evised

)%7

>oth (rance and the =nited ?ingdom successfully used exchange9rate targeting to lower inflation in the late 1517s and early 1557s by tying the value of their currencies to the ()eeeeee =. . dollar. ()ffffff @erman mar&. ()gggggg wiss franc. ()hhhhhh "uro. Answer: Question tatus: !revious "dition

#.1(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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Aisadvantages of exchange9rate targeting include: ()iiiiii An exchange9rate target has the disadvantage of leaving the country more open to a speculative attac& on its currency. ()$$$$$$ hoc&s that change interest rates in the anchor country lead to corresponding changes in interest rates in the target country. ()&&&&&& ince an exchange9rate target re,uires the central ban& to tighten monetary policy when there is a tendency for the domestic currency to depreciate or to loosen policy when there is a tendency for the domestic currency to appreciate- the time9consistency problem is more li&ely to occur. ()llllll All of the above are disadvantages. ()mmmmmm Only (a) and (b) of the above are disadvantages. Answer: Question tatus: :evised

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Aisadvantages of exchange9rate targeting include: ()nnnnnn An exchange9rate target has the disadvantage of leaving the country less open to a speculative attac& on its currency. ()oooooo hoc&s that change interest rates in the anchor country lead to corresponding changes in interest rates in the target country. ()pppppp ince an exchange9rate target re,uires the central ban& to tighten monetary policy when there is a tendency for the domestic currency to appreciate or to loosen policy when there is a tendency for the domestic currency to depreciate- the time9consistency problem is more li&ely to occur. (),,,,,, All of the above are disadvantages. ()rrrrrr Only (a) and (b) of the above are disadvantages. Answer: Question tatus: :evised

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Aisadvantages of exchange9rate targeting include: ()ssssss An exchange9rate target has the disadvantage of leaving the country more open to a speculative attac& on its currency. ()tttttt An exchange9rate target has the disadvantage of wea&ening the accountability of policyma&ers- particularly in emerging mar&et countries- because the public finds it harder to ascertain the central ban&6s policy actions. ()uuuuuu ince an exchange9rate target re,uires the central ban& to tighten monetary policy when there is a tendency for the domestic currency to depreciate or to loosen policy when there is a tendency for the domestic currency to appreciate- the time9consistency problem is more li&ely to occur. ()vvvvvv All of the above are disadvantages. ()wwwwww Only (a) and (b) of the above are disadvantages. Answer: Question tatus: :evised

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #.#

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An emerging mar&et country that successfully used exchange9rate targeting to lower its inflation from above 177 percent in 1511 to below 17 percent in 155+ (before devaluation) was ()xxxxxx 3hailand. ()yyyyyy )exico. ()////// !hilippines. ()aaaaaaa 4ndonesia. Answer: Question tatus: !revious "dition

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Aisadvantages of exchange9rate targeting include: ()bbbbbbb 3he targeting country cannot pursue an independent monetary policy. ()ccccccc 3he targeting country is open to speculative attac& on its currency whenever the anchor country pursues tight monetary policy. ()ddddddd 3he targeting country is open to speculative attac& on its currency whenever the anchor country pursues expansionary monetary policy. ()eeeeeee >oth (a) and (b) of the above. ()fffffff >oth (a) and (c) of the above. Answer: Question tatus: !revious "dition

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Aisadvantages of exchange9rate targeting include: ()ggggggg 3he anchor country cannot pursue an independent monetary policy. ()hhhhhhh 3he targeting country is open to speculative attac& on its currency whenever the anchor country pursues tight monetary policy. ()iiiiiii 3he targeting country is open to speculative attac& on its currency whenever the anchor country pursues expansionary monetary policy. ()$$$$$$$ >oth (a) and (b) of the above. ()&&&&&&& >oth (a) and (c) of the above. Answer: Question tatus: !revious "dition

)%0

"xchange9rate targeting has the disadvantage that ()lllllll countries lose the ability to pursue a monetary policy that differs from the anchor country. ()mmmmmmm countries are open to speculative attac&s on its currency- especially if unemployment rises. ()nnnnnnn shoc&s are transmitted from the anchor country to the domestic economy. ()ooooooo all of the above occur. ()ppppppp only (a) and (b) of the above occur. Answer: Question tatus: tudy @uide

#.%(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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(4) "xchange9rate targeting has the disadvantage of leaving the targeting country open to speculative attac&s on its currency. (44) "xchange9rate targeting has the advantage of reducing central ban& discretion- reducing the li&elihood of time9consistent monetary policy. (),,,,,,, >oth (4) and (44) are true. ()rrrrrrr >oth (4) and (44) are false. ()sssssss (4) is true- (44) is false. ()ttttttt (4) is false- (44) is true. Answer: Question tatus: tudy @uide

)%5

3he tight monetary policy in @ermany following reunification meant that the countries in the "uropean "xchange :ate )echanism were sub$ect to a ;;;;; shoc& that led to a decline in economic growth and a rise in unemployment. ()uuuuuuu negative supply ()vvvvvvv negative demand ()wwwwwww positive supply ()xxxxxxx positive demand Answer: Question tatus: :evised

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Bhen @ermany6s tight monetary policy following reunification forced the other countries in the ":) to adopt tight monetary policies to &eep their currencies pegged to the mar&- speculators ()yyyyyyy began to doubt that these countries would maintain high interest rates for long. ()/////// came to believe that these countries6 commitment to the exchange9rate peg would wea&en. ()aaaaaaaa sold the currencies of countries li&e (rance- pain- weden- 4taly- and the =nited ?ingdom on the expectation that these countries would allow their currencies to depreciate relative to the mar&. ()bbbbbbbb did all of the above. ()cccccccc did only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)+1

Bhen @ermany6s tight monetary policy following reunification forced the other countries in the ":) to adopt tight monetary policies to &eep their currencies pegged to the mar&- speculators ()dddddddd were convinced that these countries would maintain the tight monetary policy. ()eeeeeeee came to believe that these countries6 commitment to the exchange9rate peg would not wea&en. ()ffffffff sold the currencies of countries li&e (rance- pain- weden- 4taly- and the =nited ?ingdom on the expectation that these countries would allow their currencies to depreciate relative to the mar&. ()gggggggg did all of the above. ()hhhhhhhh did only (a) and (b) of the above. Answer: Question tatus: !revious "dition

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #.+

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(4) 3he biggest cost of exchange9rate targeting in an industriali/ed country is the loss of an independent monetary policy. (44) >ecause of the past record of 4talian monetary policy- the 4talians were the most favorable of all towards the "uropean )onetary =nion. ()iiiiiiii >oth (4) and (44) are true. ()$$$$$$$$ >oth (4) and (44) are false. ()&&&&&&&& (4) is true- (44) is false. ()llllllll (4) is false- (44) is true. Answer: Question tatus: tudy @uide

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>ecause many emerging mar&et countries have not developed the political or monetary institutions that allow the successful use of discretionary monetary policy()mmmmmmmm they have little to gain from pegging their exchange rate to an anchor country li&e the =. . or @ermany. ()nnnnnnnn they have little to gain from using a nominal anchor- because it would mean a monetary policy that is overly expansionary. ()oooooooo they have very little to gain from an independent monetary policy- but a lot to lose. ()pppppppp they would be better off giving their central ban&ers the independence to use discretion- rather than ta&e their discretion away through any nominal anchor. Answer: Question tatus: !revious "dition

)++

"merging mar&et countries are in effect between a roc& and a hard place because (),,,,,,,, they would be wise to adopt the monetary policy of the =nited tates by pegging their currencies to the dollar- but this policy leaves them open to speculative attac&s. ()rrrrrrrr to avoid speculative attac&s on their currencies they must peg their exchange rates to an anchor country- but this means giving central ban&ers in these countries too much discretion. ()ssssssss to avoid speculative attac&s on their currencies they must peg their exchange rates to an anchor country- but this means giving central ban&ers in these countries too little discretion. ()tttttttt by adopting the monetary policy of the anchor country through an exchange rate peg- these countries allow for too little monetary expansion and thereby sacrifice economic growth for price stability. Answer: Question tatus: !revious "dition

)+'

(or emerging mar&et nations- the disadvantages of exchange rate targeting include ()uuuuuuuu wea&ening the accountability of policyma&ers since the exchange rate loses its ability to signal central ban& policy actions. ()vvvvvvvv opening the country to speculative attac&s on its currency- which have far more serious conse,uences in emerging mar&ets than in industriali/ed nations. ()wwwwwwww lac& of transparency- as the public in emerging mar&et nations does not understand how to determine whether the target strategy is wor&ing. ()xxxxxxxx all of the above. ()yyyyyyyy only (a) and (b) of the above. Answer: Question tatus: tudy @uide

#.'(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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(4) 4n industriali/ed countries- the biggest cost to exchange9rate targeting is the loss of an independent monetary policy to deal with domestic considerations. (44) 4n emerging mar&et economies- fear of exchange9rate depreciations can ma&e overly expansionary- time9consistent monetary policy less li&ely. ()//////// 4 is true- 44 is false. ()aaaaaaaaa 4 is false- 44 is true. ()bbbbbbbbb >oth are true. ()ccccccccc >oth are false. Answer: Question tatus: :evised

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"xchange9rate targeting ()ddddddddd is probably not the best monetary policy strategy for industriali/ed countries unless domestic monetary and political institutions are not conducive to good monetary policyma&ing. ()eeeeeeeee is probably the best monetary policy strategy for emerging mar&et countriesespecially in countries where the long9term bond mar&et is essentially nonexistent. ()fffffffff can constrain central ban&ers from adopting overly expansionary- time9consistent monetary policy- but at the cost of a loss of an independent policy to deal with domestic considerations. ()ggggggggg All of the above are true. ()hhhhhhhhh Only (a) and (b) of the above are true of exchange9rate targeting. Answer: Question tatus: :evised

)+1

"xchange9rate targeting ()iiiiiiiii is probably not the best monetary policy strategy for emerging mar&et countries because it is not sufficiently transparent- as citi/ens in these countries do not understand exchange rates. ()$$$$$$$$$ is probably the best monetary policy strategy for industrial countries because it provides a chec& on information that is communicated through the long9term bond mar&et. ()&&&&&&&&& can constrain central ban&ers from adopting overly expansionary- time9consistent monetary policy- but at the cost of a loss of an independent policy to deal with domestic considerations. ()lllllllll All of the above are true. ()mmmmmmmmm Only (a) and (b) of the above are true of exchange9rate targeting. Answer: Question tatus: :evised

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #..

)+5

A currency board ()nnnnnnnnn is a variant of the fixed9exchange target in which the commitment to the fixed exchange rate is especially strong because the conduct of monetary policy is ta&en completely out of the hands of the central ban&. ()ooooooooo has the advantage the money supply can expand only when dollars (the anchor currency) are exchanged for domestic currency. ()ppppppppp may be effective in bringing down inflation ,uic&ly and in decreasing the li&elihood of a successful speculative attac& against the currency. (),,,,,,,,, is all of the above. ()rrrrrrrrr is only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)'7

2ompared to exchange9rate targeting- a currency board has all of the same advantages plus it reduces the li&elihood that the country adopting a currency board experiences ()sssssssss a transmission of shoc&s from the anchor country. ()ttttttttt speculative attac&s on its currency. ()uuuuuuuuu below normal growth when the anchor country experiences a recession. ()vvvvvvvvv all of the above. ()wwwwwwwww only (a) and (b) of the above. Answer: Question tatus: tudy @uide

)'1

A variant of the fixed9exchange target in which the commitment to a fixed exchange rate is especially strong because the conduct of monetary policy is ta&en completely out of the hands of the central ban& is called ()xxxxxxxxx a currency board. ()yyyyyyyyy a monetary policy board. ()///////// an Argentina board. ()aaaaaaaaaa a peg board. Answer: Question tatus: !revious "dition

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A currency board arrangement has important advantages over a monetary policy that $ust uses an exchange9rate target. ()bbbbbbbbbb 3he money supply can expand only when dollars (the anchor currency) are exchanged for domestic currency- reducing the li&elihood of inflationary monetary policy. ()cccccccccc >ecause the currency board involves a stronger commitment by the central ban& to the fixed exchange rate- inflation may drop more ,uic&ly and the li&elihood of a speculative attac& on the currency may be reduced. ()dddddddddd 3he central ban& can no longer act as a lender of last resort. ()eeeeeeeeee All of the above are advantages of a currency board. ()ffffffffffOnly (a) and (b) of the above are advantages of a currency board. Answer: Question tatus: !revious "dition

#.0(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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olutions to the problems created by a lac& of transparency and commitment to an exchange9rate target include: ()gggggggggg the adoption of a currency board. ()hhhhhhhhhh dollari/ation. ()iiiiiiiiii moneti/ation. ()$$$$$$$$$$ all of the above. ()&&&&&&&&&& only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)'+

3he &ey advantage of dollari/ation is that ()llllllllll it completely avoids the possibility of a speculative attac& on the domestic currency. ()mmmmmmmmmm it allows the government to capture the revenue from issuing currencywhich is called seignorage. ()nnnnnnnnnn the domestic central ban& can still function as a lender of last resort. ()oooooooooo it does all of the above. ()pppppppppp it does only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)''

Aisadvantages of dollari/ation include (),,,,,,,,,, elimination of the seignorage revenue the government captures from issuing currency. ()rrrrrrrrrrlosing the central ban& as a lender of last resort. ()ssssssssss elimination of the possibility of a speculative attac& on the domestic currency. ()tttttttttt all of the above. ()uuuuuuuuuu only (a) and (b) of the above. Answer: Question tatus: :evised

)'.

Aisadvantages of dollari/ation include all of the following except ()vvvvvvvvvv elimination of the seignorage revenue the government captures from issuing currency. ()wwwwwwwwww losing the central ban& as a lender of last resort. ()xxxxxxxxxx elimination of the possibility of a speculative attac& on the domestic currency. ()yyyyyyyyyy all of the above. ()////////// only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)'0

A country that dollari/es ()aaaaaaaaaaa maximi/es its seignorage. ()bbbbbbbbbbb earns the same amount of seignorage as it would with a currency board. ()ccccccccccc earns the same amount of seignorage as it would with exchange9rate targeting. ()ddddddddddd eliminates its seignorage. ()eeeeeeeeeee must pay seignorage to other governments to use their currency. Answer: Question tatus: 8ew

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #.1

)'1

3he revenue a government gains from issuing money is ()fffffffffff interest. ()ggggggggggg rent. ()hhhhhhhhhhh seignorage. ()iiiiiiiiiii the national dividend. ()$$$$$$$$$$$ the inflation tax. Answer: Question tatus: 8ew

)'5

3he seignorage for a government is greater for ;;;;; than for ;;;;;. ()&&&&&&&&&&& dollari/ation< a currency board ()lllllllllll dollari/ation< exchange9rate targeting ()mmmmmmmmmmm dollari/ation< monetary targeting ()nnnnnnnnnnn dollari/ation< inflation targeting ()ooooooooooo exchange9rate targeting< dollari/ation Answer: Question tatus: 8ew

).7

@overnments or central ban&s earn seignorage because ()ppppppppppp they pay no interest on currency and use the currency to purchase income9earn assets such as bonds. (),,,,,,,,,,, they pay a low rate of interest on the currency they issue. ()rrrrrrrrrrr they pay a low rate of interest on the bonds they issue. ()sssssssssss they issue currency to cover their deficits. ()ttttttttttt they sell bonds to redeem the currency they previously issued. Answer: Question tatus: 8ew

).1

"xchange9rate targeting is not an option for the =nited tates because ()uuuuuuuuuuu the =nited tates is already dollari/ed. ()vvvvvvvvvvv the =nited tates does not have enough gold for a fixed exchange rate. ()wwwwwwwwwww the (ed has adopted a monetary targeting strategy. ()xxxxxxxxxxx the (ed has adopted an inflation targeting strategy. ()yyyyyyyyyyy the =nited tates is too large. Answer: Question tatus: 8ew

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2ountries and areas that are too large for exchange9rate targeting include ()/////////// the =nited tates. ()aaaaaaaaaaaa Capan. ()bbbbbbbbbbbb the "uropean )onetary =nion. ()cccccccccccc all of the above. ()dddddddddddd both (a) and (b) of the above. Answer: Question tatus: 8ew

#.5(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

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3he two countries that have officially engaged in monetary targeting for over #7 years starting at the end of 150+ have been ()eeeeeeeeeeee Capan and 2anada. ()ffffffffffff 2anada and @ermany. ()gggggggggggg @ermany and wit/erland. ()hhhhhhhhhhhh wit/erland and Capan. ()iiiiiiiiiiii wit/erland and 2anada. Answer: Question tatus: !revious "dition

).+

3he reason that monetary targeting still has strong advocates is because of the success of monetary policy in ()$$$$$$$$$$$$Capan and 2anada. ()&&&&&&&&&&&& 2anada and @ermany. ()llllllllllll2anada and wit/erland. ()mmmmmmmmmmmm wit/erland and Capan. ()nnnnnnnnnnnn wit/erland and @ermany. Answer: Question tatus: !revious "dition

).'

As practiced by @ermany and wit/erland- monetary targeting policies ()oooooooooooo put great stress on ma&ing policy clear- simple- and understandable to the public by announcing a numerical inflation goal. ()pppppppppppp have been ,uite flexible in practice- especially when compared to (riedman9li&e monetary targeting. (),,,,,,,,,,,, have been used to gradually reduce inflation. ()rrrrrrrrrrrr can be described by all of the above. ()ssssssssssss can be described by only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)..

3he lessons to be learned from @erman and wiss monetary targeting include: ()tttttttttttta monetary targeting regime can restrain inflation in the longer run- even when the regime permits substantial target misses. ()uuuuuuuuuuuu adherence to a rigid policy rule has not been found to be necessary to obtain good inflation outcomes. ()vvvvvvvvvvvv fre,uent target misses are permissible if the ob$ectives of monetary policy are clearly stated and the central ban& communicates its strategy to the public- thereby enhancing the transparency of monetary policy and the accountability of the central ban&. ()wwwwwwwwwwww all of the above. ()xxxxxxxxxxxx only (a) and (b) of the above. Answer: Question tatus: :evised

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #07

).0

@erman and wiss monetary policy is actually closer in practice to ;;;;; targeting than it is to (riedman9li&e ;;;;; targeting- and thus might be thought of as DhybridE inflation targeting. ()yyyyyyyyyyyy monetary< inflation ()//////////// monetary< exchange9rate ()aaaaaaaaaaaaa inflation< monetary ()bbbbbbbbbbbbb inflation< exchange9rate ()ccccccccccccc exchange9rate< monetary Answer: Question tatus: !revious "dition

).1

A ma$or advantage of ;;;;; targeting over ;;;;; targeting is that it enables a central ban& to ad$ust its monetary policy to cope with domestic considerations. ()ddddddddddddd exchange9rate< monetary ()eeeeeeeeeeeee exchange9rate< inflation ()fffffffffffff monetary< exchange9rate ()ggggggggggggg monetary< inflation Answer: Question tatus: !revious "dition

).5

A ma$or disadvantage of ;;;;; targeting compared to ;;;;; targeting is that it prevents a central ban& from ad$usting its monetary policy to cope with domestic considerations. ()hhhhhhhhhhhhh exchange9rate< monetary ()iiiiiiiiiiiii inflation< exchange9rate ()$$$$$$$$$$$$$ monetary< exchange9rate ()&&&&&&&&&&&&& monetary< inflation Answer: Question tatus: !revious "dition

)07

A ma$or advantage of ;;;;; targeting over ;;;;; targeting is that it enables a central ban& to ad$ust its monetary policy to cope with domestic considerations. ()lllllllllllll exchange9rate< monetary ()mmmmmmmmmmmmm exchange9rate< exchange9rate ()nnnnnnnnnnnnn monetary< monetary ()ooooooooooooo monetary< exchange9rate Answer: Question tatus: !revious "dition

)01

)onetary targeting has the advantage that it ()ppppppppppppp provides almost immediate accountability for monetary policy to &eep inflation low- thus helping to constrain the monetary policyma&er from falling into the time9consistency trap. (),,,,,,,,,,,,, enables the central ban& to choose goals for inflation that may differ from those of other countries and allows some response to output fluctuations. ()rrrrrrrrrrrrr completely avoids the possibility of a speculative attac& on the domestic currency. ()sssssssssssss does all of the above. ()ttttttttttttt does only (a) and (b) of the above. Answer: Question tatus: :evised

#01(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

)0#

)onetary targeting has the advantage that it ()uuuuuuuuuuuuu provides the central ban& with greater discretion than is provided under an exchange9rate targeting policy- thereby helping to constrain the monetary policyma&er from falling into the time9consistency trap. ()vvvvvvvvvvvvv enables the central ban& to choose goals for inflation that may differ from those of other countries and allows some response to output fluctuation. ()wwwwwwwwwwwww completely avoids the possibility of a speculative attac& on the domestic currency. ()xxxxxxxxxxxxx does all of the above. ()yyyyyyyyyyyyy does only (a) and (b) of the above. Answer: Question tatus: :evised

)0%

4f the relationship between the monetary aggregate and the goal variable is wea&- then ()///////////// monetary aggregate targeting is superior to exchange9rate targeting. ()aaaaaaaaaaaaaa monetary aggregate targeting is superior to inflation targeting. ()bbbbbbbbbbbbbb inflation targeting is superior to exchange9rate targeting. ()cccccccccccccc monetary aggregate targeting will not wor&. ()dddddddddddddd inflation targeting will not wor&. Answer: Question tatus: !revious "dition

)0+

4f the relationship between the monetary aggregate and the goal variable is wea&- then ()eeeeeeeeeeeeee monetary aggregate targeting is superior to exchange9rate targeting. ()ffffffffffffff monetary aggregate targeting will not wor&. ()gggggggggggggg monetary aggregate targeting is inferior to inflation targeting. ()hhhhhhhhhhhhhh both (a) and (c) of the above are true. ()iiiiiiiiiiiiii both (b) and (c) of the above are true. Answer: Question tatus: !revious "dition

)0'

4f the relationship between the monetary aggregate and the goal variable is wea&- then monetary aggregate targeting ()$$$$$$$$$$$$$$ no longer provides an ade,uate signal about the stance of monetary policy. ()&&&&&&&&&&&&&& will not help fix inflation expectations. ()llllllllllllll will not be a good guide for assessing the accountability of the central ban&. ()mmmmmmmmmmmmmm will do all of the above. ()nnnnnnnnnnnnnn will do only (a) and (b) of the above. Answer: Question tatus: !revious "dition

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #0#

)0.

3he "uropean 2entral >an&6s monetary policy strategy ()oooooooooooooo targets exchange rates. ()pppppppppppppp is based on a currency board. (),,,,,,,,,,,,,, is a dollari/ation policy. ()rrrrrrrrrrrrrr is a hybrid strategy targeting money growth with elements of inflation targeting. ()ssssssssssssss is a hybrid strategy targeting both inflation and unemployment. Answer: Question tatus: 8ew

)00

3he goal of the "uropean 2entral >an&6s monetary policy is ()tttttttttttttt an exchange rate target. ()uuuuuuuuuuuuuu a money growth target. ()vvvvvvvvvvvvvv an inflation target. ()wwwwwwwwwwwwww an unemployment target. ()xxxxxxxxxxxxxx an interest rate target. Answer: Question tatus: 8ew

)01

A brea&down of the money growth9inflation relationship is ()yyyyyyyyyyyyyy a disadvantage for countries using a monetary9targeting regime. ()////////////// not a disadvantage for countries using an exchange9rate targeting regime. ()aaaaaaaaaaaaaaanot a disadvantage for countries using an inflation9targeting regime. ()bbbbbbbbbbbbbbb all of the above. ()ccccccccccccccconly (a) and (c) of the above. Answer: Question tatus: tudy @uide

)05

(4) )onetary aggregate targeting will not wor& if the relationship between the monetary aggregate and the goal variable is wea&. (44) 2anada was the first nation to adopt inflation targeting in 1551. ()ddddddddddddddd >oth (4) and (44) are true. ()eeeeeeeeeeeeeee>oth (4) and (44) are false. ()fffffffffffffff (4) is true- (44) is false. ()ggggggggggggggg (4) is false- (44) is true. Answer: Question tatus: tudy @uide

)17

3he first country to adopt inflation targeting was ()hhhhhhhhhhhhhhh 8ew Fealand. ()iiiiiiiiiiiiiii 2anada. ()$$$$$$$$$$$$$$$ the =nited ?ingdom. ()&&&&&&&&&&&&&&& Australia. Answer: Question tatus: !revious "dition

#0%(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

)11

4nflation targeting has the advantage that it ()lllllllllllllll it is readily understood by the public and is thus highly transparent. ()mmmmmmmmmmmmmmm enables monetary policy to focus on domestic considerations and to respond to shoc&s to the domestic economy. ()nnnnnnnnnnnnnnn the relationship between money and inflation is not crucial to its success. ()ooooooooooooooo does all of the above. ()ppppppppppppppp does only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)1#

4nflation targeting has the advantage that it (),,,,,,,,,,,,,,, does not re,uire a strong relationship between a monetary aggregate and inflation for the central ban& to achieve success. ()rrrrrrrrrrrrrrr enables a central ban& to choose goals for inflation that may differ from those of other countries and allows it to respond to output fluctuations. ()sssssssssssssss increases the accountability of the central ban&- reducing the li&elihood that the central ban& will fall into the time9inconsistency trap. ()ttttttttttttttt does all of the above. ()uuuuuuuuuuuuuuu does both (a) and (b) of the above. Answer: Question tatus: :evised

)1%

4nflation targeting has the advantage that it ()vvvvvvvvvvvvvvv is easily understood by the public and is thus highly transparent. ()wwwwwwwwwwwwwww has the potential to reduce political pressures on the central ban& to pursue inflationary monetary policy and thereby reduce the li&elihood of time9consistent policyma&ing. ()xxxxxxxxxxxxxxx is not readily understood by the public- giving central ban&ers the freedom to pursue discretionary policy with a great deal of freedom. ()yyyyyyyyyyyyyyy does both (a) and (b) of the above ()///////////////does both (b) and (c) of the above. Answer: Question tatus: :evised

)1+

A ma$or advantage of ;;;;; targeting over ;;;;; targeting is that it enables a central ban& to ad$ust its monetary policy to cope with domestic considerations. ()aaaaaaaaaaaaaaaa inflation< monetary ()bbbbbbbbbbbbbbbb inflation< exchange9rate ()cccccccccccccccc exchange9rate< monetary ()dddddddddddddddd exchange9rate< exchange9rate Answer: Question tatus: !revious "dition

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #0+

)1'

A ma$or disadvantage of ;;;;; targeting compared to ;;;;; targeting is that it prevents a central ban& from ad$usting its monetary policy to cope with domestic considerations. ()eeeeeeeeeeeeeeee exchange9rate< inflation ()ffffffffffffffff inflation< exchange9rate ()gggggggggggggggg inflation< monetary ()hhhhhhhhhhhhhhhh monetary< exchange9rate Answer: Question tatus: !revious "dition

)1.

3he decision by inflation targeters to choose inflation targets ;;;; /ero reflects the concern of monetary policyma&ers that particularly ;;;;; inflation can have substantial negative effects on real economic activity. ()iiiiiiiiiiiiiiii below< high ()$$$$$$$$$$$$$$$$ below< low ()&&&&&&&&&&&&&&&& above< high ()llllllllllllllll above< low Answer: Question tatus: !revious "dition

)10

3argeting inflation rates of ;;;; /ero ma&es periods of deflation ;;;; li&ely. ()mmmmmmmmmmmmmmmm above< less ()nnnnnnnnnnnnnnnn above< more ()oooooooooooooooo above< e,ually ()pppppppppppppppp below< less (),,,,,,,,,,,,,,,, below< e,ually Answer: Question tatus: !revious "dition

)11

:eferring to the new popularity of inflation targeting- it is noted that- DAn unusual feature of the ;;;;; legislation is that the governor of the :eserve >an& is held highly accountable for the success of monetary policy. 4f the goals set forth in the !olicy 3argets Agreement are not satisfiedthe governor is sub$ect to dismissal.E ()rrrrrrrrrrrrrrrr 2anadian ()ssssssssssssssss 8ew Fealand ()tttttttttttttttt =nited ?ingdom ()uuuuuuuuuuuuuuuu Australian Answer: Question tatus: :evised

)15

4nflation targets can increase the central ban&6s flexibility in responding to declines in aggregate spending. Aeclines in aggregate ;;;;; that cause the inflation rate to fall below the floor of the target range will automatically stimulate the central ban& to ;;;;; monetary policy without fearing that this action will trigger a rise in inflation expectations. ()vvvvvvvvvvvvvvvv demand: tighten ()wwwwwwwwwwwwwwww demand< loosen ()xxxxxxxxxxxxxxxx supply< tighten ()yyyyyyyyyyyyyyyy supply< loosen Answer: Question tatus: !revious "dition

#0'(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

)57

4nflation targeting6s critics argue that ()//////////////// the signal between monetary policy actions and evidence of success is too long delayed. ()aaaaaaaaaaaaaaaaa it imposes a rigid rule on policyma&ers- ta&ing away their ability to respond to shoc&s to the economy. ()bbbbbbbbbbbbbbbbb it has the potential for ma&ing output fluctuations more pronounced. ()ccccccccccccccccc it does all of the above. ()ddddddddddddddddd it does only (a) and (b) of the above. Answer: Question tatus: tudy @uide

)51

Bith a ;;;;; target- a decline in pro$ected real output growth would automatically imply a ;;;;; in the central ban&6s inflation target. ()eeeeeeeeeeeeeeeee monetary< rise ()fffffffffffffffff monetary< decrease ()ggggggggggggggggg nominal @A!< rise ()hhhhhhhhhhhhhhhhh nominal @A!< decrease Answer: Question tatus: !revious "dition

)5#

Bhen all is said and done- ;;;;; targeting has almost all the benefits of ;;;;; targeting- but without the problems that arise from potential confusion about what nominal @A! is or the political complications that arise because nominal @A! re,uires announcement of a potential @A! growth path. ()iiiiiiiiiiiiiiiii inflation< nominal @A! ()$$$$$$$$$$$$$$$$$ inflation< monetary ()&&&&&&&&&&&&&&&&& nominal @A!< inflation ()lllllllllllllllll nominal @A!< monetary Answer: Question tatus: !revious "dition

)5%

3argeting nominal @A! has the disadvantage that ()mmmmmmmmmmmmmmmmm there is a lac& of timely information- as nominal @A! is reported ,uarterly rather than monthly. ()nnnnnnnnnnnnnnnnn the public may confuse nominal with real @A!. ()ooooooooooooooooo policyma&ers must calculate long9run potential @A! growth. ()ppppppppppppppppp all of the above are true. (),,,,,,,,,,,,,,,,, both (a) and (b) of the above are true. Answer: Question tatus: tudy @uide

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #0.

)5+

)onetary policy rules that target nominal anchors would target any of the following except ()rrrrrrrrrrrrrrrrr the inflation rate. ()sssssssssssssssssmonetary aggregates. ()ttttttttttttttttt nominal @A!. ()uuuuuuuuuuuuuuuuu the unemployment rate. ()vvvvvvvvvvvvvvvvv the nominal exchange rate. Answer: Question tatus: !revious "dition

)5'

4n the =nited tates- the (ederal :eserve ystem targets ()wwwwwwwwwwwwwwwww exchange rates. ()xxxxxxxxxxxxxxxxx the money supply. ()yyyyyyyyyyyyyyyyy an implicit nominal anchor. ()///////////////// the inflation rates. ()aaaaaaaaaaaaaaaaaa the value of stoc& prices. Answer: Question tatus: 8ew

)5.

3he (ed6s D$ust do itE approach has the advantage that ()bbbbbbbbbbbbbbbbbb it enables the (ed to focus on domestic considerations. ()cccccccccccccccccc it does not rely on a stable money9inflation relationship. ()dddddddddddddddddd it has wor&ed to &eep inflation low and the economy growing. ()eeeeeeeeeeeeeeeeee it has done all of the above. ()ffffffffffffffffff it has done only (a) and (b) of the above. Answer: Question tatus: !revious "dition

)50

Aisadvantages of the (ed6s D$ust do itE approach include: ()gggggggggggggggggg a lac& of transparency- which creates doubt about the future course of inflation and output- and ma&es it hard to hold the (ed accountable. ()hhhhhhhhhhhhhhhhhh low accountability that may ma&e the (ed more susceptible to the time9 consistency problem. ()iiiiiiiiiiiiiiiiii the strong dependence on the preferences- s&ills- and trustworthiness of the individuals in charge of the central ban&. ()$$$$$$$$$$$$$$$$$$ all of the above. ()&&&&&&&&&&&&&&&&&& only (a) and (b) of the above. Answer: Question tatus: :evised

)51

Bhen compared to the (ed6s ;;;;; anchor approach- ;;;;; targeting can ma&e the institutional framewor& for the conduct of monetary policy more consistent with democratic principles. ()llllllllllllllllll nominal< inflation ()mmmmmmmmmmmmmmmmmm implicit< monetary ()nnnnnnnnnnnnnnnnnn nominal< monetary ()oooooooooooooooooo implicit< inflation Answer: Question tatus: !revious "dition

#00(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

)55

"conomists critical of the (ed6s implicit targeting strategy point out that ()pppppppppppppppppp the lac& of transparency of this policy approach creates unnecessary volatility in financial mar&ets. (),,,,,,,,,,,,,,,,,, the opacity of this policyma&ing strategy ma&es it difficult to hold the (ed accountable to 2ongress and the public. ()rrrrrrrrrrrrrrrrrr the policy has not been very successful- as inflation and unemployment have been too high in the 1557s. ()ssssssssssssssssss all of the above are true. ()tttttttttttttttttt only (a) and (b) of the above are true. Answer: Question tatus: tudy @uide

)177 3argeting ;;;;;;;;;; can help promote operational independence of the central ban&- because it can reduce the tensions between central ban& independence and democratic principles. ()uuuuuuuuuuuuuuuuuu exchange9rate ()vvvvvvvvvvvvvvvvvv monetary ()wwwwwwwwwwwwwwwwww inflation ()xxxxxxxxxxxxxxxxxx nominal @A! Answer: Question tatus: !revious "dition )171 3he monetary policy strategy that provides an automatic rule for the conduct of monetary policy is ()yyyyyyyyyyyyyyyyyy exchange9rate targeting. ()////////////////// monetary targeting. ()aaaaaaaaaaaaaaaaaaa inflation targeting. ()bbbbbbbbbbbbbbbbbbb the implicit nominal anchor. ()ccccccccccccccccccc all of the above. Answer: Question tatus: 8ew )17# 3he monetary policy strategy that provides an immediate signal on target achievement is ()ddddddddddddddddddd exchange9rate targeting. ()eeeeeeeeeeeeeeeeeee monetary targeting. ()fffffffffffffffffff inflation targeting. ()ggggggggggggggggggg the implicit nominal anchor. ()hhhhhhhhhhhhhhhhhhh all of the above. Answer: Question tatus: 8ew )17% 3he monetary policy strategy that does not allow the policy to focus on domestic considerations is ()iiiiiiiiiiiiiiiiiii exchange9rate targeting. ()$$$$$$$$$$$$$$$$$$$ monetary targeting. ()&&&&&&&&&&&&&&&&&&& inflation targeting. ()lllllllllllllllllll the implicit nominal anchor. ()mmmmmmmmmmmmmmmmmmm all of the above. Answer: Question tatus: 8ew

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #01

)17+ 3he monetary policy strategy that relies on a stable money9income relationship is ()nnnnnnnnnnnnnnnnnnn exchange9rate targeting. ()ooooooooooooooooooo monetary targeting. ()ppppppppppppppppppp inflation targeting. (),,,,,,,,,,,,,,,,,,, the implicit nominal anchor. ()rrrrrrrrrrrrrrrrrrr all of the above. Answer: Question tatus: 8ew )17' 3he monetary policy strategy that results in the loss of an independent monetary policy is ()sssssssssssssssssss exchange9rate targeting. ()ttttttttttttttttttt monetary targeting. ()uuuuuuuuuuuuuuuuuuu inflation targeting. ()vvvvvvvvvvvvvvvvvvv the implicit nominal anchor. ()wwwwwwwwwwwwwwwwwww all of the above. Answer: Question tatus: 8ew )17. 3he monetary policy strategy that suffers a lac& of transparency is ()xxxxxxxxxxxxxxxxxxx exchange9rate targeting. ()yyyyyyyyyyyyyyyyyyy monetary targeting. ()/////////////////// inflation targeting. ()aaaaaaaaaaaaaaaaaaaa the implicit nominal anchor. ()bbbbbbbbbbbbbbbbbbbb all of the above. Answer: Question tatus: 8ew )170 3he monetary policy strategy that provides the least accountability is ()cccccccccccccccccccc exchange9rate targeting. ()dddddddddddddddddddd monetary targeting. ()eeeeeeeeeeeeeeeeeeee inflation targeting. ()ffffffffffffffffffff the implicit nominal anchor. ()gggggggggggggggggggg all of the above. Answer: Question tatus: 8ew )171 3he monetary policy strategy that directly ties down the price of internationally traded goods is ()hhhhhhhhhhhhhhhhhhhh exchange9rate targeting. ()iiiiiiiiiiiiiiiiiiii monetary targeting. ()$$$$$$$$$$$$$$$$$$$$ inflation targeting. ()&&&&&&&&&&&&&&&&&&&& the implicit nominal anchor. ()llllllllllllllllllll all of the above. Answer: Question tatus: 8ew

#05(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

)175 A monetary policy strategy that allows for a focus on domestic considerations is ()mmmmmmmmmmmmmmmmmmmm monetary targeting. ()nnnnnnnnnnnnnnnnnnnn inflation targeting. ()oooooooooooooooooooo the implicit nominal anchor. ()pppppppppppppppppppp all of the above. (),,,,,,,,,,,,,,,,,,,, both (a) and (b) of the above. Answer: Question tatus: 8ew )117 3he monetary policy strategy that has the advantage of simplicity and clarity of target is ()rrrrrrrrrrrrrrrrrrrr exchange9rate targeting. ()ssssssssssssssssssss monetary targeting. ()tttttttttttttttttttt inflation targeting. ()uuuuuuuuuuuuuuuuuuuu the implicit nominal anchor. ()vvvvvvvvvvvvvvvvvvvv both (a) and (c) of the above. Answer: Question tatus: 8ew )111 3he monetary policy strategy that is sub$ect to speculative attac&s on the currency is ()wwwwwwwwwwwwwwwwwwww exchange9rate targeting. ()xxxxxxxxxxxxxxxxxxxx monetary targeting. ()yyyyyyyyyyyyyyyyyyyy inflation targeting. ()//////////////////// the implicit nominal anchor. ()aaaaaaaaaaaaaaaaaaaaa all of the above. Answer: Question tatus: 8ew )11# 3he monetary policy strategy that has been a demonstrated success in the =nited tates is ()bbbbbbbbbbbbbbbbbbbbb exchange9rate targeting. ()ccccccccccccccccccccc monetary targeting. ()ddddddddddddddddddddd inflation targeting. ()eeeeeeeeeeeeeeeeeeeee the implicit nominal anchor. ()fffffffffffffffffffff all of the above. Answer: Question tatus: 8ew )11% A monetary policy strategy that does not rely on a stable money9income relationship is ()ggggggggggggggggggggg monetary targeting. ()hhhhhhhhhhhhhhhhhhhhh inflation targeting. ()iiiiiiiiiiiiiiiiiiiii the implicit nominal anchor. ()$$$$$$$$$$$$$$$$$$$$$ all of the above. ()&&&&&&&&&&&&&&&&&&&&& both (b) and (c) of the above Answer: Question tatus: 8ew

2hapter #1)onetary !olicy trategy: 3he 4nternational "xperience #17

)11+ 3he monetary policy strategy that increases the accountability of the central ban& is ()lllllllllllllllllllll exchange9rate targeting. ()mmmmmmmmmmmmmmmmmmmmm monetary targeting. ()nnnnnnnnnnnnnnnnnnnnn inflation targeting. ()ooooooooooooooooooooo the implicit nominal anchor. ()ppppppppppppppppppppp all of the above. Answer: Question tatus: 8ew )11' 3he monetary policy strategy that reduces the effects of inflationary shoc&s is (),,,,,,,,,,,,,,,,,,,,, exchange9rate targeting. ()rrrrrrrrrrrrrrrrrrrrr monetary targeting. ()sssssssssssssssssssss inflation targeting. ()ttttttttttttttttttttt the implicit nominal anchor. ()uuuuuuuuuuuuuuuuuuuuu all of the above. Answer: Question tatus: 8ew )11. 3he monetary policy strategy that prevents a central ban& from printing money and acting as a lender of last resort is ()vvvvvvvvvvvvvvvvvvvvv exchange9rate targeting. ()wwwwwwwwwwwwwwwwwwwww adoption of a currency board. ()xxxxxxxxxxxxxxxxxxxxx dollari/ation. ()yyyyyyyyyyyyyyyyyyyyy all of the above. ()///////////////////// both (b) and (c) of the above. Answer: Question tatus: 8ew )110 3he monetary policy strategy that prevents a central ban& from printing money and acting as a lender of last resort is ()aaaaaaaaaaaaaaaaaaaaaa exchange9rate targeting. ()bbbbbbbbbbbbbbbbbbbbbb adoption of a currency board. ()cccccccccccccccccccccc the implicit nominal anchor. ()dddddddddddddddddddddd all of the above. ()eeeeeeeeeeeeeeeeeeeeee both (b) and (c) of the above. Answer: Question tatus: 8ew )111 3he monetary policy strategy that permits a central ban& to print money and act as a lender of last resort is ()ffffffffffffffffffffff exchange9rate targeting. ()gggggggggggggggggggggg adoption of a currency board. ()hhhhhhhhhhhhhhhhhhhhhh dollari/ation. ()iiiiiiiiiiiiiiiiiiiiii all of the above. ()$$$$$$$$$$$$$$$$$$$$$$ both (b) and (c) of the above. Answer: Question tatus: 8ew

#11(rederic . )ish&in*Economics of Money, Banking, and Financial Markets, eventh "dition

)115 3he monetary policy strategy that allows a central ban& to print money and act as a lender of last resort is ()&&&&&&&&&&&&&&&&&&&&&& exchange9rate targeting. ()llllllllllllllllllllll monetary targeting. ()mmmmmmmmmmmmmmmmmmmmmm dollari/ation. ()nnnnnnnnnnnnnnnnnnnnnn all of the above. ()oooooooooooooooooooooo both (a) and (b) of the above. Answer: Question tatus: 8ew )1#7 3he monetary policy strategy that allows a central ban& to print money and act as a lender of last resort is ()pppppppppppppppppppppp exchange9rate targeting. (),,,,,,,,,,,,,,,,,,,,,, monetary targeting. ()rrrrrrrrrrrrrrrrrrrrrr inflation targeting. ()ssssssssssssssssssssss all of the above. ()tttttttttttttttttttttt both (a) and (b) of the above. Answer: Question tatus: 8ew

Essay Questions
)1 )# )% "xplain the time9consistency problem. Bhat is the li&ely outcome of discretionary policyG Bhat are the solutions to the time9consistency problemG "xplain the 155# crisis that led to the brea&down of the "uropean =nion6s "xchange :ate )echanism. Bhat disadvantages of exchange9rate targeting were exhibited during this crisisG Bhat are the advantages and disadvantages of inflation targetingG