Monetary policy actions by the Fed are
A)more effective in a restrictive direction than they are in an expansionary direction.
B)more effective in an expansionary direction than they are in a restrictive direction.
C)equally effective in both expansionary and restrictive directions.
D)only effective when coupled with fiscal policy actions.

Question

Quizplus · Accepted Answer

Monetary policy is generally considered more effective in a restrictive direction because raising interest rates can quickly dampen borrowing and spending. In contrast, lowering rates may not always stimulate borrowing and spending if confidence is low or if there are other economic constraints.

Monetary Policy Actions by the Fed Are