What is the Barro Gordon model?
Explanations. The Barro–Gordon model shows how the ability of government to manipulate leads to inflationary bias. In this model, it is assumed that a nation will attempt to keep the unemployment rate below its natural level.
What are the merits of a discretionary monetary policy?
If the economy is in a recession, discretionary fiscal policy can lower taxes and increase spending while the Fed enacts an expansionary monetary policy. It will be done by lowering the fed funds rate or through quantitative easing. The Federal Reserve created many other tools to fight the Great Recession.
What are the anti inflationary measures?
In general, anti-inflationary measures involve raising key interest rates, sometimes dramatically, to cut down the money supply. Other anti-inflationary measures include things like instituting price controls, changing the peg of a currency, and outlawing inflation.
What is a criticism of the Phillips curve?
Many articles in the conservative business press criticize the Phillips curve because they believe it both implies that growth causes inflation and repudiates the theory that excess growth of money is inflation’s true cause.
Which of the following would have the strongest effect in eliminating the time inconsistency in monetary policy?
Which of the following would have the strongest effect in eliminating the time inconsistency in monetary policy? -Time inconsistency will be most effectively eliminated by committing policymakers to rules.
What are automatic Stabilisers in economics?
Automatic stabilizers are mechanisms built into government budgets, without any vote from legislators, that increase spending or decrease taxes when the economy slows.
What is the difference between discretionary fiscal policy and automatic Stabilisers?
Discretionary fiscal policy and automatic stabilizers are frequently confused with each other. If a government has to take any action to make it happen, it is discretionary fiscal policy. If it is something that happens on its own, it is an automatic stabilizer.
How does managerial economics control inflation?
Methods to Control Inflation
- Monetary policy – Higher interest rates reduce demand in the economy, leading to lower economic growth and lower inflation.
- Control of money supply – Monetarists argue there is a close link between the money supply and inflation, therefore controlling money supply can control inflation.