An expansionary monetary policy may be less effective than a restrictive monetary policy because
A) the Federal Reserve Banks are always willing to make loans to commercial banks that are short of reserves.
B) ﬁscal policy always works at cross purposes with an expansionary monetary policy.
C) changes in exchange rates complicate an expansionary monetary policy more than they do a restrictive monetary policy.
D) commercial banks may not be able to ﬁnd good loan customers.

Question

Quizplus · Accepted Answer

Commercial banks may not lend out additional reserves obtained through expansionary monetary policy if they cannot find creditworthy borrowers, making the policy less effective.

An Expansionary Monetary Policy May Be Less Effective Than a Restrictive