A Credible Nominal Anchor

question 28

Multiple Choice

A credible nominal anchor

• A)can help overcome the time-inconsistency problem by providing an expected constraint on discretionary policy.
• B)can help to anchor inflation expectations,which leads to smaller fluctuations in inflation.
• C)is required for a policy rule.
• D)all of the above.
• E)both A and B.

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Definitions:

International Operations

Business activities conducted in more than one country, involving cross-border transactions of goods, services, or capital.

International Fisher Effect

An economic theory stating that the difference in nominal interest rates between two countries is proportional to the expected change in the exchange rate between their currencies.

Expected Changes

Expected changes refer to anticipated modifications in conditions or variables, often used in forecasting scenarios in finance or economics.