Which of the Following Makes It Difficult for Monetary Policy-Makers

question 321

Multiple Choice

Which of the following makes it difficult for monetary policy-makers to institute policy changes in a manner that will promote economic stability?

• A) Monetary policy-makers do not have sufficient tools to alter the supply of money.
• B) The time lags between changes in monetary policy and when the changes exert an impact on output and prices are long and variable.
• C) Monetary policy is unable to alter short-term interest rates.
• D) Even though monetary policy can alter interest rates, there is little evidence that interest rates influence the demand for and prices of housing.

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Definitions:

Allocationally Efficient

Refers to a market scenario where resources are distributed in a way that maximizes the benefits to all participants, considering their preferences and needs.

Random Walk

A theory suggesting that stock market prices evolve according to a random path, making it impossible to consistently predict future movements based on past trends.

Stock Price Changes

Variations in the market price of a company’s stock over time.

Book-To-Market Firms

Firms characterized by their high book value relative to market value, often used as an investment metric.