Which of the following is not a valid argument for policy rules?
A) rules are more flexible than discretion for dealing with unpredictable shocks
B) well-functioning automatic stabilizers generally operate according to rules
C) private behavior can offset the effects of discretionary policy
D) time inconsistency can make short run and long run goals incompatible
E) discretionary policy can be destabilizing

Question

Quizplus · Accepted Answer

Policy rules are generally considered less flexible than discretion, especially in dealing with unpredictable shocks, because they are predetermined and do not allow for immediate adjustments based on current economic conditions.

Which of the Following Is Not a Valid Argument for Policy