The initial effect of a change in monetary policy appears in ____ and only later in ____.
A) The aggregate economy, financial markets.
B) Financial markets, the aggregate economy.
C) Bond markets, stock markets,
D) Stock markets, bond markets.
E) None of the above.

Question

Quizplus · Accepted Answer

The initial effect of a change in monetary policy occurs in financial markets, where interest rates and asset prices respond immediately. However, it takes time for these changes to affect the broader economy, such as through changes in borrowing and spending behavior. Therefore, the correct choice is B, where financial markets are affected first and the aggregate economy responds later.

The Initial Effect of a Change in Monetary Policy Appears