Imagine a central banker who takes office believing that, ultimately, the best way to stimulate an economy is to keep people guessing. This means the policy maker will often, but not always, announce one change but then actually do something else. What do you think of the central bank's chances for achieving its objectives and why?
What will be an ideal response?
This violates one of the requirements of a well-designed policy framework and that is credibility. If policymakers aren't credible their actions will not become stabilizing but destabilizing, and if the goal of economic policy is to reduce systematic risk, this non-credibility isn't going to work. Systematic risk will actually increase and we are likely to see a less stable economy with a slower growth rate as people spend considerable time and effort trying to guess what the policymakers are likely to do.
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Congestion pricing
A) is an estimation of the price of being off of work with the flu. B) is an attempt to internalize the external costs of driving. C) is the raising of taxes on gasoline to support the construction of mass urban transit systems. D) works fine in theory but cannot work in the real world because the technology is lacking.
Which of the following would, other things equal, reduce the demand for U.S. farm products?
A. Poorer crops abroad. B. Strong economic growth abroad. C. Improved trade relations with China and Russia. D. Appreciation of the U.S. dollar.
There would be no excess burden from a tax if demand were
A. perfectly inelastic. B. perfectly elastic. C. unitarily elastic. D. upward sloping.
Which of the following is not included in the U.S. balance of payments?
a. U.S. aid to Indonesian tsunami victims. b. U.S. corporate gifts to families who were harmed by hurricanes. c. Gifts from parents residing in foreign countries and paid to students studying at U.S. colleges and universities. d. All of the above are included in the balance of payments.