One of the Drawbacks of Rules Based Monetary Policy Is

question 59

Multiple Choice

One of the drawbacks of rules based monetary policy is ________.

• A) the current relationship between variables may not hold in the future
• B) they are too complicated for the general public to understand
• C) these types of programs are difficult to implement in practice
• D) none of the above

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Definitions:

Open-market Operations

The buying and selling of government securities by a central bank to control the money supply and interest rates in the economy.

Friedman Rule

A monetary policy rule proposed by economist Milton Friedman, suggesting that the optimal nominal interest rate is zero to eliminate the opportunity cost of holding money.

Deflation

A decrease in the general price level of goods and services, often indicating an economic slowdown.

Inflation

The velocity at which the aggregate price level for goods and services elevates, thereby reducing purchasing capability.