While this may not be a question that comes up in day-to-day conversation, for those of us who teach economics, it provides a touchstone on what we know and teach. This is particularly applicable for those of us who have students who are amateur Fed-watchers, either through predilection or involvement in programs like the Fed Challenge.
Fed Governor Mishkin presented a paper at a Deutsche Bundesbank conference on monetary policy. The entire paper is probably more than you would share with your students - it's over 40 pages with references and charts. The first 13 pages (15 in the pdf file) include nine key principles about monetary policy developed over the past 50 years. And for those of us teaching, they are worth reviewing.
1. Inflation is always and everywhere a monetary phenomenon. (This is important for students to understand in order to make choices in the civic as well as economic arena.)
2. Price stability has important benefits. (This is important for students to understand that price stability ultimately affects other aspects of the economy, and is worth pursuing.)
3. There is no long-run trade-off between unemployment and inflation. (This is important to understand that anyone offering that as a policy solution is attempting to "pull the wool" over their eyes. This has civic education aspects.)
4. Expectations play a crucial role in the determination of inflation and in the transmission of monetary policy to the economy. (It is important to understand that inflation can feed on itself, and sound policy can reduce that tendency. Again, this has some civic education aspects.)
5. Real interest rates need to rise with higher inflation, i.e. the Taylor Principle. (It is important to understand that there is a connection between real rates, monetary policy and inflation outcomes.)
6. Monetary policy is subject to the time-inconsistency problem. (This is important to understand that adjusting policy to short-term needs can make long-term outcomes harder to achieve.)
7. Central bank independence helps improve the efficiency of monetary policy. (This is important to understand the potential for problems when monetary policy is directed by objectives that are not economic. This also has civic education aspects. See #6.)
8. Commitment to a nominal anchor is central to producing good monetary policy outcomes. (This is important because there remains much debate about the issue of inflation-targets for several central banks, not the least of which is the Federal Reserve.)
9. Financial frictions play an important role in the business cycle. (This is important to understand that information is vital to a well-functioning economy and financial sector; and that business cycle fluctuations can cause information imbalances that have the potential to make matters worse.)
Those are my "take-aways." You may disagree and feel free to debate. You can access the paper and look at each in greater depth. To what extent does your teaching reflect these learned lessons?