A monetary policy rule:
A) must specify money growth at a constant rate.
B) must specify an active policy.
C) must specify a passive policy.
D) may specify either an active or a passive policy.

Question

Quizplus · Accepted Answer

A monetary policy rule can specify either an active or a passive policy depending on the central bank's approach to macroeconomic stabilization. An active policy involves the use of discretionary actions by the central bank to achieve macroeconomic objectives, whereas a passive policy relies on predetermined rules that guide the central bank's actions. Therefore, a monetary policy rule may specify either an active or a passive policy. It's not necessary for it to specify money growth at a constant rate.

A Monetary Policy Rule