Under an activist rule,

Question

Quizplus · Accepted Answer

Under an activist rule, monetary policy is allowed to change over the course of the business cycle to stabilize the economy. This may involve increasing the growth rate of money supply during a recession to stimulate spending and investment, or decreasing it during an expansion to cool down inflationary pressures. Therefore, option B is the correct answer as it reflects the key feature of an activist rule. Option A is incorrect because a higher growth rate of money supply than inflation rate may result in inflationary pressures. Option C is also incorrect because a lower growth rate of money supply than inflation rate may lead to deflationary pressures. Option D is incorrect because an inflexible monetary policy is not consistent with an activist approach.

Under an Activist Rule