Ch 14 Macroeconomic Policy

Question 1

Accommodating policy

Answer 1

a policy that allows the effects of a shock to occur

Question 2

Anchored inflationary expectations

Answer 2

when people’s expectations of future inflation do not change even if inflation rises temporarily

Question 3

Credibility of monetary policy

Answer 3

the degree to which the public believes the central bank’s promises to keep inflation low, even if doing so may impose short-run economic costs

Question 4

Central bank independence

Answer 4

when central bankers are insulated from short-term political considerations and are allowed to take a long-term view of the economy

Question 5

Inflation hawk

Answer 5

someone who is committed to achieving and maintaining low inflation, even at some short=run cost in reduced output and employment

Question 6

Inflation dove

Answer 6

someone who is not strongly committed to achieving and maintaining low inflation

Question 7

Supply-side policy

Answer 7

a policy that affects potential output

Question 8

Marginal tax rate

Answer 8

the amount by which taxes rise when before-tax income rises by one dollar

Question 9

Average tax rate

Answer 9

total taxes divided by total before-tax income

Question 10

Inside lag (of macroeconomic policy)

Answer 10

the delay between the date a policy change is needed and the date it is implemented