Question : 17.3   Alternative Monetary Policy Strategies 1) Discretionary monetary policy defined as : 1240655

17.3   Alternative Monetary Policy Strategies

1) Discretionary monetary policy is defined as policy

A) for which the markets make all decisions.

B) that is based on the judgments of policymakers.

C) that is pursued regardless of the current state of the economy.

D) that responds to a changing economy with predetermined rules.

E) for which the policymaker always publicizes the policy as extensively as possible because its effectiveness depends on the public’s knowledge of the policy.

2) Discretionary monetary policy is monetary policy that is based on

A) the judgment of Congress about the current needs of the economy.

B) a rule that allows no discretion in how policymakers respond to the state of the economy.

C) the ups and downs of the stock market.

D) the judgment of the monetary policymakers about the current needs of the economy.

E) rules that depend upon the state of the economy.

3) If the Fed bases its monetary policy on judgments of its policymakers about the current needs of the economy, it is following

A) a monetary base instrument rule.

B) discretionary policy.

C) an inflation targeting rule.

D) wait-and-see policy.

E) a money targeting rule.

4) Which of the following is NOT an alternative rule for monetary policy?

A) a monetary base instrument rule

B) a money targeting rule

C) a natural unemployment rate targeting rule

D) a nominal GDP targeting rule

E) an inflation rate targeting rule

5) Of the following, which is NOT a monetary policy rule the Fed could follow?

A) a nominal GDP targeting rule

B) an unemployment rate targeting rule

C) an inflation targeting rule

D) a k-percent rule

E) a money targeting rule

6) Maintaining the growth of the money supply at a constant rate is an example of

A) discretionary policy.

B) a money targeting rule.

C) a money demand rule.

D) an inflation targeting rule.

E) a nominal GDP targeting rule.

7) The proposal to keep the quantity of money growing at a slow constant rate is an example of

A) discretionary policy.

B) an inflation rate targeting rule.

C) a constant federal funds rate rule.

D) a money targeting rule.

E) a nominal GDP targeting rule.

8) Milton Friedman’s k-percent rule says to set the rate of growth of the quantity of money equal to

A) the unemployment rate.

B) the rate of growth of potential GDP.

C) last year’s growth rate of real GDP.

D) the real interest rate.

E) a constant rate.

9) An example of Friedman’s k-percent rule is

A) “every time GDP decreases, decrease the growth rate of the quantity of money.”

B) “set the growth rate of the quantity money equal to the unemployment rate.”

C) “every time GDP decreases, increase the growth rate of the quantity of money.”

D) “do not change the growth rate of the quantity of money.”

E) “use all information available to determine the growth rate of the quantity of money each time GDP changes.”

10) Under a k-percent rule, if the economy goes into expansion, the Fed would

A) raise the federal funds rate.

B) lower tax rates to keep revenue constant.

C) lower the federal funds rate.

D) increase the quantity of money.

E) None of the above answers is correct.