Why should monetary policy be made by rule rather than discretion?
A)because there is a clear consensus among economists about what a good monetary policy rule would be
B)because rules would eliminate the political business cycle
C)because rules respond to any random shocks in the economy
D)because rules create time inconsistency

Question

Quizplus · Accepted Answer

Rules would eliminate the political business cycle, which is a situation where policymakers manipulate economic conditions to influence electoral outcomes. By following a fixed rule, policymakers would be less likely to make politically motivated decisions and instead focus on achieving long-term economic stability.

Why Should Monetary Policy Be Made by Rule Rather Than