Assume the Bank of Canada creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad.This situation is a problem of:
A)cyclical asymmetry.
B)a restrictive monetary policy.
C)the net export effect.
D)a decrease in the velocity of money.

Question

Quizplus · Accepted Answer

Cyclical asymmetry refers to the situation where monetary policy is less effective in stimulating the economy during a downturn because banks are unwilling to lend despite having excess reserves.

Assume the Bank of Canada Creates Excess Reserves in the Banking