Which statement is incorrect?
A) A monetary rule may not be appropriate in the case of a major economic shock.
B) Monetary rules are based on the assumption that the economy will return to full employment on its own in the long run.
C) If one believes that frequent changes in monetary policy can have destabilizing effects on the economy, then a monetary rule may be appropriate.
D) Monetary rules assume that the Federal Reserve has perfect insight into the effects of monetary policy on the economy.

Question

Quizplus · Accepted Answer

Monetary rules do not assume perfect insight into the effects of monetary policy on the economy. In fact, one of the challenges of implementing a monetary rule is finding the appropriate variables to target and determining the appropriate responses to changes in those variables.

Which Statement Is Incorrect