Questions

1. Discuss the Lucas critique.

2. What is meant by policy rules?

3. List and discuss 2 arguments in support of policy rules.

4. List and discuss 2 arguments in support for policy discretion.5. Explain what you understand by "policy makers operating with discretion rather than rules".6. What is meant by credibility in commitment to a goal, or target?

7. Explain 2 advantages when there is credibility in the nominal anchor of the central bank?

8. Compare and contrast the effects of a positive and negative AD shock wheni. There is credibility in the nominal anchor of the central bankii. There is no credibility in the nominal anchor of the central bank

Assume nominal anchor: inflation rate

9. Compare and contrast the effects of a positive and negative AS shock wheni. There is credibility in the nominal anchor of the central bankii. There is no credibility in the nominal anchor of the central bank

Assume nominal anchor: inflation rate