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Author Question: The cyclical unemployment rate changes with business cycle fluctuations. Indicate whether the ... (Read 78 times)

luminitza

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on: Jun 29, 2018
The cyclical unemployment rate changes with business cycle fluctuations.
 
  Indicate whether the statement is true or false

Question 2

What is the main difference between an instrument rule and a targeting rule? Be sure to define each.
 
  What will be an ideal response?


paavo

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Reply #1 on: Jun 29, 2018
Answer to Question 1

TRUE

Answer to Question 2

An instrument rule sets the policy instrument using a formula based on the current state of the economy. A targeting rule sets the policy instrument at a level that makes the central bank's forecast of the ultimate policy goals equal to their targets. The main difference between the two is that the targeting rule is based on a forecast of the economy while the instrument rule is based on the state of the economy.


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