When policymakers make decisions in response to a pre-specified rule, they are undertaking

Question

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Passive policy refers to a pre-specified rule or formula that is followed without the need for discretionary decision-making. This approach typically involves the use of automatic stabilizers or fixed targets for key economic variables such as inflation or unemployment. In contrast, active policy involves discretionary decision-making by policymakers in response to changing economic conditions, while irrational policy would not be based on any rational decision-making process. Therefore, the best answer is C) passive policy.

When Policymakers Make Decisions in Response to a Pre-Specified Rule