To implement the Friedman rule for long-term monetary policy, the monetary authority would need to set the

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According to the Friedman rule, the nominal interest rate should be set at zero to achieve optimal long-term economic growth. This is because under the assumption of rational expectations and no menu costs, a zero nominal interest rate allows for a zero real interest rate, which leads to optimal investment decisions and maximizes economic welfare. Setting the inflation or money growth rate to zero would not necessarily be optimal for long-term growth, as some inflation or money growth may be necessary to support economic activity and investment. Setting the output growth rate to equal the inflation rate is not related to the Friedman rule.

To Implement the Friedman Rule for Long-Term Monetary Policy, the Monetary