Author Question: What might an anti-inflation hawk do so that good macroeconomic performance is likely to continue ... (Read 56 times)

stephzh · **on:** Jun 30, 2018

What might an anti-inflation hawk do so that good macroeconomic performance is likely to continue under his or her successors as head of the central bank?

What will be an ideal response?

Question 2

Refer to Figure 12.3. Suppose that after a negative supply shock, the economy is at point X in the IS-MP model and at point B on the Phillips curve.

If the Fed has a goal of price stability, the economy would ________ in the IS-MP model and ________ on the Phillips curve. A) move to point Y; move to point C
B) remain at X; move to point A
C) move to point Y; remain at point B
D) move to point Z; move to point A

huda · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

To institutionalize good policy making, the central bank head should encourage elected officials to demand that monetary policy objectives and strategies be publicly announced and explained. As an alternative to political influence, the head of the central bank should be required to report and to justify discrepancies between announced objectives and observed performance.

Answer to Question 2

A