An instrument rule is based on ________ of the economy while a targeting rule is based on ________ of the economy.
A) the current state; a forecast
B) the current state; the previous state
C) a forecast; the current state
D) the previous state; the current state
E) a forecast; the previous state

Question

Quizplus · Accepted Answer

An instrument rule is based on the current state of the economy, such as setting interest rates based on inflation and employment rates. On the other hand, a targeting rule is based on a forecast of economic variables, such as setting a target for inflation rates and adjusting policies accordingly.

An Instrument Rule Is Based on ________ of the Economy