One problem with using monetary policy to address "bubbles" in asset markets is that:
A)the Federal Reserve is better than financial-market professionals at identifying bubbles.
B)monetary policy is not a very good tool for addressing the problem of inappropriately high asset prices.
C)reducing the real interest rate to deal with the bubble could lead to inflation.
D)the Federal Reserve is not interested in stabilizing output.

Question

Quizplus · Accepted Answer

Monetary policy works well to affect interest rates but it is not effective for specific financial problems like asset price bubbles.

One Problem with Using Monetary Policy to Address "Bubbles" in Asset