ECON 2035 Study Guide - Adaptive Expectations, Rational Expectations, Monetarism
Document Summary
Inflation rate changes depends partly on expectations: shown through philips curve: = e + a , 2 types of expectations: Adaptive expectations: expectations based on past values. Select to run monetary policy he/she is more likely not to break a low inflation rate promise by increasing output. Federal reserve is one of the most independent central banks in the world. Governors serve 14 yr terms and cannot be removed. Presidents of the fed res banks are chosen by the banks" n=board of directors with no input from the congressional budget appropriations process. Members of the board of governors have been chosen more for their technical expertise, not as political appointments. Congress can change the structure of the fed by passing a new law. Long time was most independent in the world changed in 20yrs more central banks have become more independent. Elected officials should control monetary policy or at least have greater influence over the fed.
