Analysis of the Transmission Mechanisms of Monetary Policy Provides Four

question 20

Multiple Choice

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. These lessons include:

• A) Monetary policy can be highly effective in reviving a weak economy so long as short-term interest rates are not too close to zero.
• B) Avoiding fluctuations in the level of unemployment is an important objective of monetary policy, thus providing a rationale for interest-rate stability as the primary long-run goal for monetary policy.
• C) Other asset prices beside those on short-term debt instruments contain important information about the stance of monetary policy because they are important elements in various monetary policy transmission mechanisms.
• D) A and B only.

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Definitions:

Ventricle

A hollow part or cavity in an organ, particularly one of the two main chambers of the heart or the brain.

Splenectomy

A surgical procedure involving the removal of the spleen.

Laproscopy

A minimally invasive surgical procedure that allows a surgeon to access the inside of the abdomen and pelvis without making large incisions in the skin.

-kinesis

A suffix used in biology and medicine indicating movement or locomotion by a particular mechanism or caused by a specific stimulus.