822 $
© 2014 Pearson Canada Inc.$26.2 Policy Conduct: Rules or Discretion
A policy in which the money supply is kept growing at a constant rate regardless of the state
of the economy is ____.
A) a Taylor rule
B) a discretionary policy
C) a policy rule advocated by monetarists
D) advocated by activists
Answer: C
Diff: 2 Type: MC Page Ref: 622
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
The Lucas critique highlighted the need for ____.
A) better econometric models
B) new policy models that included rational expectations
C) fiscal policy
D) adaptive expectations
Answer: A
Diff: 2 Type: MC Page Ref: 621
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
Operating with discretion in a monetary policy sense implies ____.
A) making no commitment to future actions
B) a constant growth rate rule
C) introducing a zero inflation rule
D) making decisions without regulatory oversight
Answer: A
Diff: 2 Type: MC Page Ref: 621
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
The time inconsistency problem with respect to policy conduct means ____.
A) the tendency to deviate from long-run plans when making short run decisions
B) implementing a constant growth rate rule
C) that politicians are not elected for long enough time frames
D) there is no room for hard and fast monetary rules
Answer: A
Diff: 2 Type: MC Page Ref: 622
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates