Analysis of the Transmission Mechanisms of Monetary Policy Provides Four

question 1

Multiple Choice

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy.Which of the following is not one of these lessons?

• 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 unanticipated fluctuations in the price level is an important objective of monetary policy, thus providing a rationale for price 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 important elements in various monetary policy transmission mechanisms.

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Definitions:

Eidetic Images

Vivid and detailed mental images that can be recalled with high precision, often referred to as photographic memory.

Long-Term Memory

The phase of the memory process that is characterized by the virtually unlimited capacity to store and retain information over extended periods.

Short-Term Memory

The faculty to maintain a minor amount of details in a condition of readiness and activeness for a short span.

Procedural

Procedural refers to a type of memory responsible for knowing how to perform tasks and skills, often carried out without conscious awareness.