If a central bank wants to make sure that its policy actions are successful in manipulating interest rates to stabilize the economy around its full-employment level it should
A)be prepared to make modest and frequent adjustments after receiving feedback on how its actions affect the economy
B)never announce its intentions, because financial markets will always overreact
C)frequently change its policies to keep financial markets guessing
D)react to excess inflation but not to economic booms
E)all of the above

Question

Quizplus · Accepted Answer

By being open to receiving feedback on the effects of its policies and making modest and frequent adjustments accordingly, the central bank can better ensure that their policy actions are successful in stabilizing the economy around its full-employment level. This allows for a more flexible and responsive approach to economic fluctuations, rather than relying on one static policy that may not be effective in all situations. The other options are not as effective or advisable, as never announcing intentions can create uncertainty and frequently changing policies can be destabilizing. Reacting only to excess inflation also ignores other important economic factors.

If a Central Bank Wants to Make Sure That Its