Which of the following approaches should the Fed use if it experiences large lags and mistakes in monetary policy?
A) Discretionary policy
B) An eclectic approach
C) Fixed rules
D) Fiscal policy

Question

Quizplus · Accepted Answer

Fixed rules may be the best choice in this scenario as they provide a clear, predetermined framework for monetary policy decisions, which can help minimize mistakes and reduce the impact of lags. By contrast, discretionary policy and an eclectic approach may be more susceptible to mistakes and lags, as they rely more heavily on the judgment and expertise of policymakers in interpreting economic data and making decisions in real time. Fiscal policy, meanwhile, is a separate tool that operates through government spending and taxation, and is unlikely to provide a viable alternative to addressing lags and mistakes in monetary policy.

Which of the Following Approaches Should the Fed Use If