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 directly slow down borrowing and spending. In contrast, lowering rates to stimulate the economy may be less effective if businesses and consumers are unwilling to borrow and spend.

Monetary Policy Actions by the Fed Are