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Arguments for discretionary policies include ____.
A) policy rules can be too rigid because they cannot foresee every contingency
B) policy rules do not easily incorporate the use of judgment
C) discretion avoids the straightjacket that would lock in the wrong policy if the model that was
used to derive the policy rule proved to be incorrect
D) discretion enables policy makers to change policy settings when an economy undergoes
structural changes
E) all of the above
Answer: E
Diff: 2 Type: MC Page Ref: 623 - 624
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
____ imposes a conceptual structure and inherent discipline on policy makers, but
without eliminating all flexibility.
A) Constrained discretion
B) A policy rule
C) A discretionary policy
D) The Taylor rule
Answer: A
Diff: 2 Type: MC Page Ref: 624
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates