Analysis of the Transmission Mechanisms of Monetary Policy Provides Four

question 9

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 the following.

• A)Rising interest rates indicate a tightening of monetary policy,whereas falling interest rates indicate an easing of monetary policy.
• B)Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero.
• C)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.
• D)Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are not important elements in various monetary policy transmission mechanisms.