Which of the Following Makes It More Difficult for Monetary

question 101

Multiple Choice

Which of the following makes it more difficult for monetary policy makers to time policy changes correctly?

• A) Monetary policy makers cannot act without congressional approval.
• B) The primary effects of the policy change will not be felt for 6 to 15 months into the future.
• C) The Board of Governors of the Federal Reserve System does not meet very often.
• D) Monetary policy affects only the general level of prices; it exerts no impact on real variables such as output and employment.

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Definitions:

Deflation

A decrease in the general price level of goods and services, often indicating a contraction in the overall economy.

Real Output

The quantity of goods and services produced in an economy, adjusted for inflation, representing true productivity.

Long-Term Contracts

Agreements between parties that last over an extended period, often used to secure pricing, terms, and conditions.

Federal Deposit Insurance Corporation

A U.S. government agency that protects depositors in the event of a bank failure by insuring deposits up to a certain limit.