Topic 1 - Barro-Gordon

Question 1

What was Freidman’s rule that targeted a constant rate of growth of the money supply?

Answer 1

The k percent rule

Question 2

Friedman and simmons said that following a rule would eliminate:

Answer 2

The danger of instability and uncertainty of policy

Question 3

Simmon’s rule targeted a:`

Answer 3

Constant price level in the short run

Question 4

What does time consistency concern?

Answer 4

The effectiveness of a policy today depends on the credibility of the commitment to implement that policy in the future

Question 5

In the loss function, b =

Answer 5

importance of unemployment vs inflation

Question 6

in the Loss function, Pi =

Answer 6

Inflation

Question 7

What is pi^e?

Answer 7

Inflation expected by the private sector

Question 8

If monetary authorities announce zero inflation and are not bound by a rule, will the private sector expect the government to cheat?

Answer 8

Yes

Question 9

What does discretion mean?

Answer 9

The absence of rules

Question 10

What does disinflation mean?

Answer 10

Realised inflation is below what private sector expects

Question 11

When an economy is disinflated, unemployment is pushed:

Answer 11

Above its natural rate

Question 12

The private sector can truthfully believe:

Answer 12

Binding rules

Question 13

If monetary authorities set inflation = 0 under discretion, this results in:

Answer 13

Disinflation

Question 14

Short term interest rate is used by central banks as:

Answer 14

The main tool of monetary policy