Textbook Problem

Advocates for setting monetary policy by rule rather than discretion often argue that

a. central bankers with discretion are tempted to renege on their announced commitments to low inflation.

b. central bankers following a rule will be more responsive to the needs of the political process.

c. fiscal policy is a much better tool for economic stabilization than is monetary policy.

d. it is sometimes useful to give the economy a burst of surprise inflation.