Janet Yellen believes that the credibility of the Fed\'s policy announcements is

Question

Janet Yellen believes that the credibility of the Fed's policy announcements is particularly important because

in the past, the Fed was embroiled in a bribery and corruption scandal that shook the government and dealt a crushing blow to the Fed's integrity.

if monetary policy is to be effective, workers, firms, and investors in stock and bond markets have to view the Fed's announcements as credible.

in the past, the Fed's trade policy was disastrous on the U.S. trade deficit and that shook the public's confidence in the Fed's competence.

the public expects the Fed to be fair and credible in the way it runs both its fiscal and monetary policies, often in conjunction with one another.

in the past, the Fed was embroiled in a bribery and corruption scandal that shook the government and dealt a crushing blow to the Fed's integrity.

if monetary policy is to be effective, workers, firms, and investors in stock and bond markets have to view the Fed's announcements as credible.

in the past, the Fed's trade policy was disastrous on the U.S. trade deficit and that shook the public's confidence in the Fed's competence.

the public expects the Fed to be fair and credible in the way it runs both its fiscal and monetary policies, often in conjunction with one another.

Explanation / Answer

Ans. - B
if monetary policy is to be effective, workers, firms, and investors in stock and bond markets have to view the Fed's announcements as credible

Reason - As the credibility of FOMC increases it will help to improve the effectiveness of monetary policy not only for controlling inflation but also for stabilizing employment and output.

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