Monetary policy is
A) neutral in the short run but can have strong effects in the long run.
B) is neutral in the long run but can provide either expansionary or contractionary pressure in the short run.
C) is neutral in the long run but can provide some expansionary pressure only in the short run.
D) is neutral in the long run but can provide some contractionary pressure only in the short run.
E) none of the above.

Question

Quizplus · Accepted Answer

Monetary policy is generally considered neutral in the long run, meaning it does not have a permanent effect on real variables like output or employment. However, in the short run, it can influence economic activity by either stimulating the economy (expansionary) or slowing it down (contractionary) through adjustments in interest rates and the money supply.

Monetary Policy Is