Question

5 H )

Inflation allows central banks to run more expansionary monetary policy because it allows them to achieve :

	positive real interest rates so that monetary policy can be more expansive than it otherwise could be.
	positive nominal interest rates so that monetary policy can be more expansive than it otherwise could be.
	negative real interest rates so that monetary policy can be more expansive than it otherwise could be.
	negative nominal interest rates so that monetary policy can be more expansive than it otherwise could be.

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The placebo effect of inflation refers to ;

	increased value of assets that creates the illusion that society is richer which encourages more investment and growth.
	ability of monetary policy makers to reveal the impact of inflation on interest rates and manipulate the economy towards potential.
	decreased value of assets that creates the illusion that society is poorer which encourages increases in investment and growth.
	inability of monetary policy to have any real effect on the economy.

The placebo effect is a tool of ;

	conventional monetary policy because this type of policy emphasizes the benefits of increasing inflation.
	unconventional monetary policy because this type of policy emphasizes the benefits of low inflation.
	unconventional monetary policy because this type of policy emphasizes the benefits of increasing inflation.
	conventional monetary policy because this type of policy emphasizes the benefits of low inflation.

Answer 1

Q5 (H)

Inflation allows central banks to run more expansionary monetary policy because it allows them to achieve negative real interest rates so that monetary policy can be more expansive than it otherwise could be.

The placebo effect of inflation refers to increased value of assets that creates the illusion that society is richer which encourages more investment and growth.

The placebo effect is a tool of unconventional monetary policy because this type of policy emphasizes the benefits of increasing inflation.