Questions

a) Which of the following is a requirement in selecting a policy instrument?

Options

1. Measurability
2. Flexibility
3. Predictability
4. Controllability

b) If the Fed were to use the Taylor rule to set the federal funds rate target, which of the following goals would it be using to set monetary policy?

Options

1. Both low inflation and full employment
2. full employment
3. low inflation
4. none of these

c) Which of the following criteria need to be satisfied for choosing a policy instrument?

Options

1. The variable must be controllable.
2. The variable must be predictable
3. The variable must be measurable
4. The variable must be transportable

d) Which of the following is an advantage of inflation targeting?

Options

1. reduction of the time-inconsistency problem
2. increased monetary policy transparency
3. consistency with democratic principles
4. There is an immediate signal on the achievement of the target.