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:

Dipole-Dipole Forces

Intermolecular forces between two polar molecules due to the positive and negative poles attracting each other.

Compounds

Substances consisting of two or more different elements chemically bonded together in a fixed ratio.

Permanent Dipole

A dipole moment that persists in a molecule due to the unequal sharing of electrons in covalent bonds.

Ethylene Glycol

A colorless, odorless, sweet-tasting liquid with the formula C2H6O2, widely used as an automotive antifreeze and a precursor to polymers.