Why Should Monetary Policy Be Made by Rule Rather Than

question 75

Multiple Choice

Why should monetary policy be made by rule rather than discretion?

• A) There is a clear consensus among economists about what a good monetary policy rule would be.
• B) Rules would eliminate the political business cycle.
• C) Rules respond to any random shock in the economy.
• D) Rules create time inconsistency.

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Definitions:

Inventory Turnover

A ratio showing how many times a company has sold and replaced inventory over a period.

Accounts Payable Turnover

A financial ratio that measures the rate at which a company pays off its suppliers by comparing net purchases to average accounts payable during a period.

Accounts Receivable Period

The Accounts Receivable Period is the average number of days it takes for a business to receive payments from its customers for goods or services sold on credit.

Accounts Receivable

Receivables from customers for goods or services provided but not yet compensated.