ECON 2035 Chapter : Chapter19 Strategy And Tactics
Document Summary
19 the conduct of monetary policy: strategy and tactics (p. 456) The price stability goal and the nominal anchor: Inflation results in (difficulty interpreting relative price movements) The most common definition that central bankers use for price stability is (low and stable inflation) Price stability is desirable because (inflation creates uncertainty, making it difficult to plan for the future) Economists believe that countries recently suffering hyperinflation have experienced (reduced growth) A nominal variable, such as the inflation rate or the money supply, which ties down the price level to achieve price stability is called (a nominal) anchor. A central feature of monetary policy strategies in all countries is the use of a nominal variable that monetary policymakers use as an intermediate target to achieve an ultimate goal such as price stability. Such a variable is called a nominal (anchor) A nominal anchor promotes price stability by (keeping inflation expectations low)
