Article Summary In a September 2013 Speech to the Independent Bankers Association

question 121

Multiple Choice

Article Summary
In a September 2013 speech to the Independent Bankers Association of Texas, Federal Reserve Bank of Dallas president Richard Fisher stated that the Fed's credibility was harmed when it announced the previous week that it would continue its large bond purchasing program. In June, Fed Chairman Ben Bernanke had stated that that the program could begin to be cut back later in the year, and several other Fed officials expressed being open to the announced timing of this policy. Bernanke's change in his announced timeline of the Fed's intentions regarding the bond purchasing program brought criticism that the Fed had misled investors. In his speech, Fisher stated "I disagreed with the decision of the committee and argued against it. Doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question. I believe that is exactly what has occurred, though I take no pleasure in saying so." Fisher has been a long-time opponent of the Fed's bond purchasing program, claiming it is ineffective and may well lead to future inflation, and had been calling for the Fed to begin phasing out this program in September.
Source: "Fisher: Standing pat on policy hurt Fed's credibility," Reuters, September 23, 2013.

-Refer to the Article Summary.If the Federal Reserve's announcements about upcoming monetary policy decisions are not seen as credible,as Richard Fisher alludes to regarding the announcements about the bond purchasing program,which of the following would you expect to see?

• A)Inflation expectations will accurately reflect actual inflation.
• B)Expansionary monetary policy will result in lower rates of inflation.
• C)Firms and workers will be unable to accurately forecast changes in the rate of inflation.
• D)The Federal Reserve will have more control over the inflation rate.

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Definitions:

Path-goal

A leadership theory that suggests leaders can adjust their behavior and strategies to satisfy their followers' needs, thereby enhancing performance and satisfaction.

Situational Approach

A leadership model suggesting that the most effective leadership style varies according to the situation or context.

Leader Behaviors

Actions and attitudes displayed by leaders that influence their group's performance, morale, and effectiveness.

Expectancy Theory

A motivational theory suggesting that individuals are likely to act in a certain way based on the expectation that the act will be followed by a desired outcome.