An Advantage of Macroeconomic Policy Based on Pre-Specified Rules Might

question 36

Multiple Choice

An advantage of macroeconomic policy based on pre-specified rules might be that ________.

• A)it is easier to stick to long-run considerations and avoid bad long-run outcomes
• B)it is more flexible than discretionary policy
• C)it is easier to adapt to short-run changes and avoid a bad short-run outcome
• D)all of the above
• E)none of the above

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Definitions:

Dominant Strategy

In game theory, a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Economic Profit

The difference between revenue received from the sale of an output and the opportunity cost of the inputs used.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged, representing a state of strategic balance.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs.