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

Question

Quizplus · Accepted Answer

If monetary policy is unpredictable, it can create uncertainty for households and firms, causing changes in behavior that can affect real variables in the short run. Even if monetary policy is fully communicated and consistent, if it is anticipated and expected, then the impact on real variables may not be as significant.

Monetary Policy Can Affect Real Variables in the Short Run