A central bank that follows a dual mandate A. places equal weight on two coequal objectives. B. will first achieve its primary goal before it pursues it secondary goals. C. mostly uses open-market operations and occasionally uses the discount rate. D. uses open-market operations and discount lending equally. Is it better for an economy to operate under a hierarchical mandate or a dual mandate?

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Tony Ortiz

Business

25 August, 20:54

A central bank that follows a dual mandate A. places equal weight on two coequal objectives. B. will first achieve its primary goal before it pursues it secondary goals. C. mostly uses open-market operations and occasionally uses the discount rate. D. uses open-market operations and discount lending equally. Is it better for an economy to operate under a hierarchical mandate or a dual mandate?

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Bentley Conrad · Answer 1

A) places equal weight on two coequal objectives. The problem a central bank may have by dealing only with a hierarchical mandate is that it may focus only on that specific goal and not properly take care of other variables; If it focuses only in unemployment, it may increase inflation too much; If it only focuses on inflation, it might increase unemployment.

Explanation:

The Federal Reserve's Dual Mandate is to regulate monetary policy in order to foster economic conditions that achieve both stable prices and maximum sustainable employment.

The FED's current dual mandate was given to them by Congress through the Federal Reserve Act of 1977.