DEFINITION of 'Fixed-Rule Policy'

A fiscal or monetary policy designed to be an economic goal or target of a government. A fixed-rule policy, by definition, is pursued no matter the condition of the economy, and is considered independent of the current economic state.

BREAKING DOWN 'Fixed-Rule Policy'

For example, a fixed-rule policy of any government could be that the maximum target level of inflation must be less then 5% for any given year, as measured by the consumer price index (CPI). By creating a fixed-rule policy, a government can focus on longer term goals for an economy, and provide economic direction.

RELATED TERMS
  1. Policy Mix

    A government's combined use of fiscal policy and monetary policy ...
  2. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  3. Economic Conditions

    The state of the economy in a country or region. Economic conditions ...
  4. Price Level Targeting

    A monetary policy goal of keeping overall price levels stable, ...
  5. Stabilization Policy

    A macroeconomic strategy enacted by governments and central banks ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
Related Articles
  1. Insights

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  2. Trading

    A Look At Fiscal And Monetary Policy

    Fiscal and monetary policies provide our government and the Federal Reserve with two powerful tools to regulate the economy.
  3. Insights

    Fiscal Vs. Monetary Policy Pros & Cons

    When it comes to influencing macroeconomic outcomes, governments have typically relied on one of two primary courses of action: monetary policy and fiscal policy.
  4. Insights

    A Look At Fiscal And Monetary Policy

    There's a debate over which policy is better for the economy. Find out which side of the fence you're on.
  5. Financial Advisor

    Why Tweaking Monetary Policy Has Reached It's Limit

    Here's why Barclays believes that banks and governments are running out of options to stimulate economic growth.
  6. Insights

    How Much Influence Does The Fed Have?

    Find out how current financial policies may affect your portfolio's future returns.
  7. Investing

    How Is the Bank of Japan Monetizing Government Debt?

    With its massive QE program and more recent adoption of negative interest rates, it looks like the BOJ is monetizing the Japanese government's debt.
  8. Investing

    What's Tight Monetary Policy?

    A tight monetary policy constricts spending and curbs inflation.
  9. Taxes

    The Fundamentals of Draghinomics

    European Central Bank President Mario Draghi has introduced a set of reforms aimed at reviving the eurozone economy.
  10. Trading

    Monetary Policy

    Monetary policy is a central bank’s actions that influence the country’s money supply and the overall economy.
RELATED FAQS
  1. What's the difference between monetary policy and fiscal policy?

    Learn how monetary policy refers to bank actions to control interest rates and money supply, while fiscal policy refers to ... Read Answer >>
  2. Under what circumstances will a government change its monetary policy?

    Learn about the kind of variables, including political and theoretical factors, that can bring about change in a government's ... Read Answer >>
  3. What impact does economics have on government policy?

    Learn about the impact of economic conditions on government policy and understand how governments engineer economic conditions ... Read Answer >>
  4. How successful is fiscal policy in guiding the national economy?

    See why it is difficult to evaluate the impact of fiscal policy on the national economy and how fiscal tools have failed ... Read Answer >>
  5. How can a change in fiscal policy have a multiplier effect on the economy?

    Learn about how changes in fiscal policy have a multiplier effect on the economy. The goal of expansionary fiscal policy ... Read Answer >>
  6. Which is more effective: expansionary fiscal policy or expansionary monetary policy?

    Determine the best form of expansionary economic policy: fiscal or monetary. Both have their pros and cons and are appropriate ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center