Monetary policy is ________ it was in the past ________ the income effect of an interest rate change on consumption has increased.

Question

Quizplus · Accepted Answer

The income effect of an interest rate change on consumption increasing implies that changes in interest rates have a greater impact on consumers' disposable income and therefore their spending. If this effect has increased, it suggests that monetary policy, which often involves changing interest rates to influence economic activity, would be less effective than in the past because the income effect could counteract the intended stimulative or cooling effects of policy changes.

Monetary Policy Is ________ It Was in the Past ________

Monetary Policy Is It Was in the Past