The rule, "Do not change the growth rate of the quantity of money regardless of the state of the economy," is an example of
A) an exchange rate targeting rule.
B) the McCallum rule.
C) an inflation rate targeting rule.
D) a k- percent money targeting rule.

Question

Quizplus · Accepted Answer

The given rule is an example of a k-percent money targeting rule. This rule involves maintaining a constant growth rate (k) of the money supply irrespective of the state of the economy. The central bank adjusts the money supply to achieve this target growth rate, which can help to stabilize prices and inflation. The McCallum rule is a specific type of k-percent rule that uses both current and lagged values of inflation and output to determine the optimal growth rate of the money supply. Inflation rate targeting and exchange rate targeting are other monetary policy frameworks that focus on stabilizing specific economic variables.

The Rule, "Do Not Change the Growth Rate of the Quantity