Holding all else constant, an economic expansion in Mexico should ...

[HudsonKB16]

Holding all else constant, an economic expansion in Mexico should decrease the demand for U.S. dollars.
 
  Indicate whether the statement is true or false

Question 2

Why is the credibility of the Fed's policy announcements particularly important?
 
  What will be an ideal response?

[wfdfwc23]

Answer to Question 1

FALSE

Answer to Question 2

The credibility of policy announcements is important for the effectiveness of monetary policy because a more credible policy allows the Fed to have a greater impact on the expected inflation rate. In particular, a credible policy of disinflation will cause the short-run Phillips curve to shift down more rapidly than if the policy is less credible, thereby making the increase in the unemployment rate smaller and briefer.

[HudsonKB16]

TYSM

[Zebsrer]

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