A problem with a precommitment policy is that it:
A)determines the Fed's response for a period of time.
B)binds the hands of the Fed from responding to unexpected events.
C)will cause the Fed to lose credibility.
D)locks the Fed into contractionary policy.

Question

Quizplus · Accepted Answer

A precommitment policy can limit the Federal Reserve's flexibility by committing it to a specific course of action, thereby restricting its ability to respond to unforeseen economic developments.

A Problem with a Precommitment Policy Is That It