Economists are more likely to be in favor of a strict monetary policy rule if they
A)believe that the Phillips curve is close to vertical even in the short run
B)believe that the economy is basically self-correcting
C)want to minimize the problem of dynamic inconsistency
D)favor a truly independent central bank
E)all of the above

Question

Quizplus · Accepted Answer

All of the given options are reasons why economists would be in favor of a strict monetary policy rule. 
A) A vertical Phillips curve means that there is little to no trade-off between inflation and unemployment. With a strict monetary policy rule, policy makers can focus solely on keeping inflation low without worrying about the impact on employment.
B) If economists believe that the economy is self-correcting, they may see little need for discretionary monetary policy (policies that are adjusted based on current economic conditions). A strict monetary policy rule would provide a predictable framework for monetary policy.
C) Dynamic inconsistency refers to the problem of individuals or policy makers making plans based on one set of expectations and then changing their behavior when actual outcomes do not meet those expectations. A strict monetary policy rule can help minimize this problem by providing a clear policy framework that individuals and policy makers can plan around.
D) If economists believe in the importance of central bank independence, they may see a strict monetary policy rule as a way to limit political influence on monetary policy.

Economists Are More Likely to Be in Favor of a Strict