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Chapter 17 Monetary Policy Targets and Goals

Chapter Objectives

By the end of this chapter, students should be able to:

  1. Explain why the Fed was generally so ineffective before the late 1980s.
  2. Explain why macroeconomic volatility declined from the late 1980s until 2008.
  3. List the trade-offs that central banks face and describe how they confront them.
  4. Define monetary targeting and explain why it succeeded in some countries and failed in others.
  5. Define inflation targeting and explain its importance.
  6. Provide and use the Taylor Rule and explain its importance.