What Is One Problem with Targeting Monetary Aggregates

question 18

Multiple Choice

What is one problem with targeting monetary aggregates?

• A) The impact of policy changes is hard to determine.
• B) It is pro-cyclical.
• C) It leads to low volatility in interest rates.
• D) All of the above.

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Definitions:

Recession

Cyclical economic contraction that lasts for six months or longer.

Deregulation

Regulatory trend toward elimination of legal restraints on competition in industries previously served by a single firm in an attempt to improve customer service and lower prices through increased competition.

Regulated Monopolies

Monopolies that are allowed to exist by the government but with restricted and controlled powers to prevent unfair practices.

Cyclically Unemployed

Individuals who are without jobs due to the downturns in the business cycle, rather than through personal choice, often temporary and affected by economic recessions.