Is the monetary policy reaction curve applicable only to central banks that have an explicit inflation target? Explain.
What will be an ideal response?
No. The monetary policy reaction curve really summarizes the central bank's response to inflation and output gaps. The response to inflation is shown explicitly. The response to output gaps is implicit assuming that output gaps impact the inflation rate. The monetary policy reaction curve can also illustrate policymakers' responses to inflation when the inflation target is implicit. This can be tested and verified using historical data.
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Indicate whether the statement is true or false
The world rate of population growth is closest to
(a) 1%. (b) 2%. (c) 3%. (d) 4%.
The amount of investment demand at each interest rate suddenly falls. If the Fed holds to an unchanged money supply target, the change in GDP is __________ if it had held to an unchanged interest rate target
A) greater than B) less than C) the same as
If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are transaction costs of US$50, and the exchange rate is 20 rand/US$, then
A) there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in South Africa will drop. B) there is an arbitrage opportunity by buying the wine in South Africa., and selling it in the U.S. and the price in the U.S. will drop. C) here is an arbitrage opportunity by buying the wine in South Africa., and selling it in the U.S. and the price in the U.S. will rise. D) there is no arbitrage opportunity.