Economists who support a monetary rule as opposed to an activist monetary policy believe that the effectiveness lag in monetary policy is
A)short and variable,policy changes affect AD quickly and are predictable.
B)zero,policy changes have an immediate effect on expenditures.
C)long and variable,policy changes affect AD slowly over time and are unpredictable.
D)long,but predictable.

Question

Quizplus · Accepted Answer

Economists who support a monetary rule argue that the effectiveness lag in monetary policy is long and variable because policy changes affect aggregate demand (AD) slowly over time and the outcomes of such changes are unpredictable. This unpredictability and delay make it difficult to time interventions correctly, hence their preference for a rule-based approach to monetary policy.

Economists Who Support a Monetary Rule as Opposed to an Activist