Which is the MOST credible monetary policy action?
A) The central bank makes policy actions in secret to avoid speculation.
B) The central bank attempts to confuse the public by changing its policy stance frequently.
C) The central bank announces its policy in public and sticks with the policy over time.
D) The central bank does nothing to the economy regardless of any economic shock.

Question

Quizplus · Accepted Answer

Transparency and consistency are important for building credibility in monetary policy. By announcing its policy in public and sticking with it over time, the central bank can help anchor inflation expectations and provide clarity to financial markets and the public. Secret actions or frequent changes in policy stance can undermine the credibility of the central bank and create uncertainty in the economy. Doing nothing in response to economic shocks is also not a credible or responsible monetary policy action.

Which Is the MOST Credible Monetary Policy Action