Because the Fed can easily provide too much or too little response to economic shocks,many economists advocate:
A) policy discretion.
B) policy rules.
C) no response to any shock.
D) a wait-and-see policy.

Question

Quizplus · Accepted Answer

Policy rules provide a set of predetermined guidelines that guide the Fed's response to economic shocks. This helps to avoid the problems associated with discretionary policy, where there is a risk of over or under-reaction. Policy rules help to ensure consistency in policy decisions, which can improve economic outcomes over the long run.

Because the Fed Can Easily Provide Too Much or Too