An Expansionary Monetary Policy May Be Less Effective Than a Restrictive

question 204

Multiple Choice

An expansionary monetary policy may be less effective than a restrictive monetary policy because:

• A)the Bank of Canada is always willing to make loans to chartered banks that are short of reserves.
• B)fiscal policy always works at cross purposes with an expansionary monetary policy.
• C)the circularity or feedback problem complicates an expansionary monetary policy more than it does a restrictive monetary policy.
• D)chartered banks may not be willing to lend their excess reserves to the customers.

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Definitions:

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