Why Should Monetary Policy Be Made by Rule Rather Than

question 12

Multiple Choice

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

• A) The economy is subject to a variety of random shocks.
• B) Monetary policymakers are now allowed undisciplined discretion.
• C) It is not clear how important political business cycles have been in the past.
• D) Central banks can achieve credibility over time by backing up their words with deeds.

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