Describe why monetary policy rules are superior to discretionary monetary policy
What will be an ideal response?
Rules are superior to discretion because rules allow people in the economy greater insight into how the Fed will respond to events and allow people to be aware of how the Fed's policy is likely to change the inflation rate. The economy functions better if the expected inflation rate equals, or is close to, the actual inflation rate and rules make this outcome more likely than would pure discretionary policy.
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A characteristic common in both oligopoly and monopolistic competition is:
A) a small number of firms compete in the market. B) natural or legal barriers prevent the entry of new firms into the market. C) each firm faces a downward-sloping demand curve. D) the firms in the market are interdependent. E) each firm has a large share of the market.
Which of the following has served most recently as Chairman of the Board of Governors of the Federal Reserve System?
A) Nancy Pelosi B) Alan Greenspan C) Ben Bernanke D) Paul Volcker