When the velocity of money is unstable, a rules-based approach to monetary policy is likely to be extremely effective.

Question

Quizplus · Accepted Answer

A rules-based approach to monetary policy, which relies on specific guidelines or formulas to determine monetary policy actions, may not be extremely effective when the velocity of money is unstable. This instability can make it difficult to predict the effects of policy changes on the economy, reducing the effectiveness of a one-size-fits-all rules-based approach.

When the Velocity of Money Is Unstable, a Rules-Based Approach