The principal reason that monetary policy has lags is that it takes a long time for
A)changes in the money supply to change interest rates.
B)the Fed to make changes in policy.
C)changes in the interest rate to change aggregate demand.
D)Congress and the President to approve Fed policy.

Question

Quizplus · Accepted Answer

Monetary policy primarily affects the economy through changes in interest rates, which in turn influence aggregate demand. This process takes time as businesses and consumers adjust their spending and investment decisions in response to interest rate changes.

The Principal Reason That Monetary Policy Has Lags Is That