Which would be an example of running monetary policy by rules?
A) A 5% increase in money supply automatically leads to a 2% increase in real GDP.
B) An increase in money supply growth automatically leads to an increase in inflation.
C) The Fed will increase money growth to different levels,depending on the severity of the recession.
D) A 1% drop in real GDP growth will automatically elicit a 2% increase in money growth.

Question

Quizplus · Accepted Answer

Running monetary policy by rules means that certain actions are taken automatically based on specific economic indicators. In this case, a 1% drop in real GDP growth leads to a 2% increase in money growth. This provides a clear and predictable reaction to economic conditions, which is an example of using rules to guide monetary policy.

Which Would Be an Example of Running Monetary Policy by Rules