44) Anti-inflationary policy is less costly when that policy is anticipated in _

Question

44) Anti-inflationary policy is less costly when that policy is anticipated in ________.

A) traditional Keynesian theory.

B) new Keynesian theory.

C) real business cycle theory.

D) institutionalist theory.

45) An increase in financial frictions results in ________.

A) an increase in output and inflation.

B) a rise in the interest rate set by monetary policy.

C) a decline in the real interest rates faced by households and firms.

D) a decline in the interest rate set by monetary policy.

46) When the credit spread rises, an effective policy response might be to ________.

A) lower the real interest rate on safe assets

B) prevent the real federal funds rate from falling below zero

C) pursue nonconventional monetary policies to restore the functioning of financial markets

D) announce swift and stern action against those responsible for the financial disruption

Explanation / Answer

44 B :

Reference : http://wps.aw.com/wps/media/objects/7529/7710164/bonuschapters/webch03.pdf

45 : C

Reference : https://www.princeton.edu/~itskhoki/papers/FinFrictionsDevoPolicy.pdf page 5

46: B

Reference : http://www.citibank.com/ipb/europe/pdfs/monthly_0313.pdf

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