The main advantage of making monetary policy according to rules is that it allows a more favourable short-run trade-off between inflation and unemployment.

Question

Quizplus · Accepted Answer

Rules-based monetary policy provides clear guidelines for central banks to follow, which can lead to more predictability and stability in the economy. This can result in better short-run trade-offs between inflation and unemployment as central banks can adjust interest rates according to the rules to achieve their desired macroeconomic outcomes.

The Main Advantage of Making Monetary Policy According to Rules