The basic distinction between a rigid policy rule and a feedback policy rule is that a rigid policy rule
A) specifies completely the behavior of the variable influenced by the rule; a feedback rule allows that variable to change.
B) requires congressional action; a feedback rule is governed by the Fed.
C) targets the money supply; a feedback rule is used when controlling interest rates.
D) is advocated by the new Keynesians; traditional Keynesians favor a feedback policy rule.
E) is used when targeting the full-employment level of real GDP; a feedback rule is used when targeting the full-employment level of nominal GDP.

Question

Quizplus · Accepted Answer

A rigid policy rule specifies a fixed behavior for the variable it targets, while a feedback policy rule allows for adjustments based on changes in that variable. This is the fundamental difference between the two types of rules. The other answer choices are either incorrect or irrelevant to the question.

The Basic Distinction Between a Rigid Policy Rule and a Feedback