Question

How is constrained discretion different from discretion in monetary policy? How are the outcomes of these policies likely to differ?

Short answer

constrained discretion is quite transparent and flexible than monetary policy.

Step-by-step solution

Content Introduction

The term " constrained discretion" refers to a governmental commitment to keep inflation low and steady. As a result, the principal goal of confined discretion is low inflation, with discretion and monetary policy focusing solely on the overall stability of the economy.

Content Explanation

The transparency and flexibility are the main contrasts we notice between restricted discretion and monetary policy. It's quite open with little discretion, owing to its goal of low, stable inflation. Now, because of the variety of things that are being focused on, monetary policy discretion does not have quite as much transparency, and when it comes to flexibility, constrained discretion is quite flexible, even though they have a large focus on low inflation discretion and monetary policy fluctuates in being flexible.