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Economist Smith Favors an Activist Monetary Policy

Question 77

Multiple Choice

Economist Smith favors an activist monetary policy.He says that if the economy is going to be stabilized over time,it is necessary to fine-tune the money supply to the particular economic conditions that exist.What would economist Jones,who favors rules-based monetary policy,say to economist Smith?


A) Because of long lags,activist monetary policy is likely to be destabilizing rather than stabilizing.
B) There have been times when activist monetary policy has worked well.
C) There have been times when a constant-money-growth-rate rule has worked poorly.
D) Flexibility is desirable when it comes to monetary policy.

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