Economic analysis indicates that the monetary policy of the 1930s, which shifted back and forth between restrictive monetary policy and expansionary monetary policy, would likely result in
A) economic stability and growth in real levels of output.
B) keeping the general level of prices relatively stable because the periods of restrictive policy would just offset the periods of expansion.
C) an environment of uncertainty, which would lead to economic instability.
D) economic stability, because changes in monetary policy can be counted on to exert a predictable impact on the economy quickly.

Question

Quizplus · Accepted Answer

Frequent shifts between restrictive and expansionary monetary policies create uncertainty, which can lead to economic instability as businesses and consumers find it difficult to make long-term economic decisions.

Economic Analysis Indicates That the Monetary Policy of the 1930s