A problem with a monetary rule that requires the fed to keep money growth constant is that: the Fed must ignore changes in money velocity.
One difficulty with such a policy, of course, is that the Fed would react to past economic conditions with policies that are unlikely to affect the economy for a year or more. Another difficulty is that inflation can increase as the economy goes through the recession gap.
An example of this, mentioned earlier, occurred in 1990 when inflation increased due to oil prices seemingly temporarily rising after Iraq invaded Kuwait. The Fed faced a similar situation in the first half of 2008 when oil prices rebounded. If the Fed implements a tight monetary policy at such times, the Fed's efforts to reduce inflation could deepen the recession gap.
To learn more about monetary policy from given link
https://brainly.com/question/13926715
#SPJ4
