Monetary policy by the Fed is estimated to take _____ to have an impact on the economy.
A) 0 to 3 months
B) 3 to 6 months
C) 6 to 18 months
D) 18 to 36 months

Question

Quizplus · Accepted Answer

Monetary policy by the Fed is estimated to take 6 to 18 months to have an impact on the economy. This is because the transmission mechanism through which monetary policy affects the economy operates with a lag. It takes time for changes in interest rates and other monetary policy tools to influence borrowing costs, spending, and investment decisions made by businesses and households, which in turn affect economic activity and inflation.

Monetary Policy by the Fed Is Estimated to Take _____