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:

Management Exception

A management principle where only significant deviations from set standards are brought to the attention of management to optimize decision-making efficiency.

Actual Performance

The real, measurable outcomes of an individual's or organization's work, often compared against expected or intended performance.

Below Standard

A performance or quality level that does not meet the set baseline or expected criteria, indicating the need for improvement or corrective action.

Input Standards

Measure work efforts that go into a performance task.