Which Statement Is Incorrect

Multiple Choice

Which statement is incorrect?

A) A monetary rule may not be appropriate in the case of a major economic shock.
B) Monetary rules are based on the assumption that the economy will return to full employment on its own in the long run.
C) If one believes that frequent changes in monetary policy can have destabilizing effects on the economy, then a monetary rule may be appropriate.
D) Monetary rules assume that the Federal Reserve has perfect insight into the effects of monetary policy on the economy.