A benefit to policymakers of following rules rather than discretion is
A)they could employ a larger staff of economists.
B)they will contribute to the formation of an expectations trap.
C)they would not be able to pursue time-inconsistent policies.
D)they would gain flexibility in case the economy's structure changed.

Question

Quizplus · Accepted Answer

Following rules rather than discretion can prevent policymakers from pursuing time-inconsistent policies, which can have negative effects on economic stability and credibility. By adhering to predetermined rules, policymakers can also promote consistency and transparency, which can help to build trust with the public and financial markets. However, following rules may limit policymakers' flexibility to adapt to changing circumstances, which could be a drawback in some cases.

A Benefit to Policymakers of Following Rules Rather Than Discretion