Arguments for adopting a policy rule include
A)discretion avoids the straightjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect.
B)discretion enables policy makers to change policy settings when an economy undergoes structural changes.
C)discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run.
D)all of the above.

Question

Quizplus · Accepted Answer

Discretionary policies can lead to overly expansionary monetary policies, which may boost employment in the short run but result in higher inflation in the long run, making a case for adopting a policy rule to avoid such outcomes.

Arguments for Adopting a Policy Rule Include