Short-run monetary policy changes should
A)ignore any fiscal policy changes that the administration has implemented
B)allow for modest adjustments once feedback from previous changes is available
C)never be implemented if uncertainty exists about the exact effects on key variables
D)requires the central bank to stick to its announced policy target no matter what
E)none of the above

Question

Quizplus · Accepted Answer

Short-run monetary policy changes should allow for modest adjustments once feedback from previous changes is available. This is because monetary policy is not an exact science, and it is important to gather feedback and data before making further adjustments. Completely ignoring fiscal policy changes (A) or blindly sticking to announced policy targets (D) can be detrimental. While uncertainty may exist (C), it is necessary to make informed decisions based on available information.

Short-Run Monetary Policy Changes Should