Which is regarded as a policy rule?
A) making policy on the fly
B) changing the money supply growth with discretion
C) adjusting policy actions to deal with the nature of the economic shocks
D) keeping the money supply growth rate consistent with a given inflation rate

Question

Quizplus · Accepted Answer

Keeping the money supply growth rate consistent with a given inflation rate is regarded as a policy rule. This type of policy rule is known as inflation targeting, which is when a central bank sets a specific inflation target and adjusts the money supply growth rate to achieve that target. It is a rule-based approach to monetary policy rather than relying on discretionary decisions. A and C are examples of discretionary policy-making, while B is a type of discretionary policy action.

Which Is Regarded as a Policy Rule