Arguments for Discretionary Policies Include

question 16

Multiple Choice

Arguments for discretionary policies include

• A)policy rules can be too rigid because they cannot foresee every contingency.
• B)policy rules do not easily incorporate the use of judgment.
• C)discretion avoids the straightjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect.
• D)discretion enables policy makers to change policy settings when an economy undergoes structural changes.
• E)all of the above.

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Definitions:

Linear Relationship

A type of relationship between two variables where changes in one variable are directly proportional to changes in another variable.

Population Correlation Coefficient

A measure of the strength and direction of the linear relationship between two variables in a population.

Correlation

A statistical measure that expresses the extent to which two variables change together, indicating the strength and direction of their relationship.

Probability Distribution

A statistical description enumerating all likely values and their corresponding probabilities for a random variable within a set interval.