Even a monetary policy based on a rigid high-powered money growth rate rule can lack policy credibility,due in part to ________,while a policy that targets the inflation rate itself ________.
A)lags,must have policy credibility by definition
B)lags,can lack credibility due to both lags and multiplier certainty
C)multiplier uncertainty,must have policy credibility by definition
D)multiplier uncertainty,can lack credibility due to both lags and multiplier uncertainty

Question

Quizplus · Accepted Answer

A monetary policy based on a rigid high-powered money growth rate rule can lack policy credibility due to multiplier uncertainty, as the effects of changes in the monetary policy may not be predictable with certainty. On the other hand, a policy that targets the inflation rate itself can still lack credibility due to both lags and multiplier uncertainty.

Even a Monetary Policy Based on a Rigid High-Powered Money