Explain the difference between the Fed following discretionary policy and the Fed following a rules strategy
What will be an ideal response?
Discretionary policy occurs when policymakers conduct policy in any way that it believes will achieve its goals. In the case of the Fed, discretionary policy means the Fed conducts monetary policy in any way it believes it will achieve its goals of price stability and high employment.
A rules strategy occurs when policymakers conduct policy by following specific and publicly announced guidelines to achieve its goals. In the case of the Fed, following a monetary rule is an attempt by the Fed to follow specific and publicly announced guidelines for monetary policy in order to achieve its goals of price stability and high employment.
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A breakdown of financial markets can result in
A) financial stability. B) rapid economic growth. C) political instability. D) stable prices.
Four banks are offering the same interest rate of 4%. Where do you invest?
A) Bank A compounds interest on a yearly basis. B) Bank B compounds interest on a monthly basis. C) Bank C compounds interest on a daily basis. D) I am indifferent between banks.