The Basic Distinction Between a Rigid Policy Rule and a Feedback

question 22

Multiple Choice

The basic distinction between a rigid policy rule and a feedback policy rule is that a rigid policy rule

• A) specifies completely the behavior of the variable influenced by the rule; a feedback rule allows that variable to change.
• B) requires congressional action; a feedback rule is governed by the Fed.
• C) targets the money supply; a feedback rule is used when controlling interest rates.
• D) is advocated by the new Keynesians; traditional Keynesians favor a feedback policy rule.
• E) is used when targeting the full-employment level of real GDP; a feedback rule is used when targeting the full-employment level of nominal GDP.

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Definitions:

Common Stock

A kind of stock that signifies having a stake in a company, accompanying the power to vote and the possibility of receiving dividends.

Stockholders' Equity

After liabilities are removed, what remains of the assets in a corporation, indicating an ownership share.

Liabilities

Financial obligations or debts that a company owes to outside parties, which must be settled over time through the transfer of economic benefits.

Assets

Resources owned by a company that have economic value and can be used to meet debts or commitments.