If inflation is expected:
a.
the effects of monetary policy will be amplified.
b.
prices are not sticky.
c.
the effects of fiscal policy will be amplified.
d.
prices become sticky.
e.
the effects of monetary policy will be delayed.
When the inflation is expected:-
Prices are not sticky and tends to change
option(B)
If inflation is expected: a. the effects of monetary policy will be amplified. b. prices are...
52. Studying alternative theories of how people form expectations is particularly relevant to monetary policy because A. if people fully expect inflation to occur, the effects of monetary policy are more widespread. monetary policy can only have real effects on the economy if people fully expect inflation. c. unexpected inflation cause prices to be flexible. d. the effects of expected inflation are completely different from the effects of unexpected inflation e expected inflation causes prices to become sticky. 53. Monetary...
16. Which statement best characterizes the effects of monetary policy? (1 mark) a. Monetary policy is neutral in both the short run and the long run; therefore, it does not affect real variables. b. Monetary policy is neutral in the long run, but it may have effects on real variables in the short run. c. Monetary policy has profound effects on real variables in both the short run and the long run. d. Monetary policy has profound effects on real...
WEEK 6: MONETARY POLICY AND FISCAL POLICY A healthy economy typically has low rates of unemployment and steady prices. Low rates of unemployment means that the economy is operating at its full potential. To ensure the economy continues to operate at potential GDP (full capacity where all savings are invested in production functions, and where all those who wish to work can find a job, and all other factors of production are fully utilized in the production function), governments use...
How do sticky wages and prices make monetary policy effective in the short run?
Contractionary monetary policy reduces stock prices, which reduce the value of financial assets and increase the probability of household financial distress. Households with less access to liquid assets spend less on consumption and residential investment. This statement describes which of the following monetary transmission channels A. Traditional interest-rate effects. B. Wealth effects. C. Balance sheet channel. D. Household liquidity effects. E. Tobin's q theory.
The short-run Phillips Curve assumes an unchanging Multiple Choice expected rate of inflation. fiscal or monetary policy actual rate of inflation. unemployment rate
(a)Which is more effective between fiscal policy and monetary policy in tacking inflation and tackling economic recession? (b) Discuss fully the relationship between the quantity theory of money and money demand
When government bond prices are changed by monetary policy:A. bond prices and AD move together.B. bond prices and AD move in opposite directions.C. bond prices and investment move in opposite directions.D. bond prices and unemployment tend to move in opposite directions.E both a. and d. are true.
How did the "Coyne Affair" motivate the current system of joint responsibility for monetary policy? Select the best answer O A. A royal commission resulting in part from the Coyne affair, recommended a system of joint responsibility in 1967 the bank act was amended to confirm this system O B. Louis Rasminsky, the third governor of the Bank of Canada, issued an ultimatum for the Bank of Canada to have the sole hand in monetary policy It was overturned by...
Why is QE a controversial monetary policy tool. A. It may lead to excessive inflation. B. By artificially propping up asset prices, it benefits wealthy households the most. C. Households on a fixed income (e.g., retirees) are worse-off because historically low interest rates make it more difficult to live off of their savings. D. It creates a moral hazard problem as firms may be encouraged to take on riskier assets in the future feeling they would be "bailed-out" if anything...