"As Greenspan Chases Inflation, Critics Shout, 'Faster!'
"For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "... the declining price of oil, economic fundamentals, incl productivity and global competition, will keep inflation in check." The Fed, recognizing that the eco was improving stated it planned to "respond to changes in economic prospects as needed to fulfill i obligation to maintain price stability." Other economists disagree with the Fed's restrained policy "mistake."
Www)nytimes, 7/1/20
Economists estimate that if the Fed's policy was enacted in July 2004, the impact on the economy
A) will reach its fullest extent, affecting real GDP, in three to six months.
B) will occur to its fullest extent within one month.
C) can be expected to stretch over one to two years.
D) will not be evident in the exchange rate market until 2005.

Question

Quizplus · Accepted Answer

Monetary policy changes, such as interest rate adjustments by the Fed, typically take one to two years to fully impact the economy, including real GDP.