Suppose the government is heavily in debt. Why might it be tempting for the fiscal policymakers to sell additional bonds to the central bank in a move that it knows would be inflationary?
Answer to relevant QuestionsAccording to Figure New Zealand in the 1970s and 1980s combined high inflation with relatively little central bank independence. In 1989, New Zealand became the first country to adopt an inflation target. How did this policy ...Evaluate the following statement: “The Treaty of Maastricht helped solve the time consistency problem in monetary policy but not fiscal policy.” In 2012, the FOMC stated for the first time that it aims at an inflation rate of 2 percent (based on the price index of personal consumption expenditures). How might this announcement help secure price stability?Do you think the current procedures for appointing members to the Board of Governors are consistent with the principles of good central bank design? Explain your answer. Does theFederal Reserve frequently purchase or sell gold or foreign exchange as part of its efforts to change the money supply?
Post your question