Monetary policy can affect real variables in the short run if monetary policy:
A)surprises households.
B)is consistent.
C)is predictable.
D)all of the above.

Question

Quizplus · Accepted Answer

If monetary policy surprises households, they may change their spending and saving behavior in response, which can affect real variables in the short run. If monetary policy is consistent or predictable, households may already incorporate its effects into their behavior and the impact on real variables would be smaller or nonexistent.

Monetary Policy Can Affect Real Variables in the Short Run