Chapter 25 - Macroeconomic policy

________ may be improved if expectations of inflation are anchored.

________ (of macroeconomic policy): delay between the date a policy a change is implemented and the date by which most of its effects on the economy have occurred.

________: when central bankers are insulated from short- term political considerations and are allowed to take long term view of the economy.

________: policy that affects potential output.

policy that allows the effects of a shock to occur

when people's expectations of future inflation do not change even if inflation rises temporarily

the extent to which the central bank is independent from the executive and legislative branches of the government, the announcement of a numerical inflation target, and the reputation of the central bank as an "inflation hawk."

degree to which the public believes the central bank's promises to keep inflation low, if even if doing so may impose short-run economic costs

when central bankers are insulated from short-term political considerations and are allowed to take long term view of the economy

someone who is committed to achieving and maintaining low inflation, even at some short-run cost in reduced output and employment

someone who is not strongly committed to achieving and maintaining low inflation

policy that affects potential output

amount by which taxes rise when before-tax income rises by one dollar

total taxes divided by total before-tax income

delay between the date a policy change is needed and the date it is implemented

delay between the date a policy a change is implemented and the date by which most of its effects on the economy have occurred

Policy that allows the effects of a shock to occur

When people's expectations of future inflation do not change even if inflation rises temporarily

Degree to which the public believes the central bank's promises to keep inflation low, if even if doing so may impose short-run economic costs

When central bankers are insulated from short-term political considerations and are allowed to take long term view of the economy

Someone who is committed to achieving and maintaining low inflation, even at some short-run cost in reduced output and employment

Someone who is not strongly committed to achieving and maintaining low inflation

Policy that affects potential output

Amount by which taxes rise when before-tax income rises by one dollar

Total taxes divided by total before-tax income

Delay between the date a policy change is needed and the date it is implemented

Delay between the date a policy change is implemented and the date by which most of its effects on the economy have occurred