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) 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.

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Definitions:

In-Group

A social group to which a person psychologically identifies as being a member.

Currying Favor

The act of using flattery or strategic friendliness to gain favor or advantaged treatment from someone, especially in a professional or political context.

Future Favors

Acts or services performed with the expectation that they will be repaid in the future; often in the context of building reciprocal relationships.

Reciprocity Concept

A social norm suggesting that a favor or good deed should be returned in kind, fostering cooperation and positive relationships among individuals.