An Opponent of Monetary Policy Decisions by Rule Would Point

question 104

Multiple Choice

An opponent of monetary policy decisions by rule would point to which of the following as support of his case?

• A)time inconsistency of policy
• B)flexibility to confront unforeseen circumstances
• C)political business cycle
• D)the ability to craft rules that account for all possible contingencies in advance

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Definitions:

Substitution

The economic principle of replacing one input or good for another due to changes in prices or preferences.

Indifference Curve

A graph representing different combinations of goods or services among which a consumer is indifferent, showing preference levels.

Utility Function

A mathematical representation of a consumer’s preference, showing the amount of satisfaction or utility derived from consuming various bundles of goods and services.

Perfect Complements

Pair of goods that are consumed together in fixed proportions because the consumption of one good enhances the consumption of the other.