Which of the following makes it more difficult for monetary policy makers to time policy changes correctly?
A) Monetary policy makers cannot act without congressional approval.
B) The primary effects of the policy change will not be felt for 6 to 15 months into the future.
C) The Board of Governors of the Federal Reserve System does not meet very often.
D) Monetary policy affects only the general level of prices; it exerts no impact on real variables such as output and employment.

Question

Quizplus · Accepted Answer

The fact that the primary effects of a policy change will not be felt for 6 to 15 months into the future makes it difficult for monetary policy makers to time policy changes correctly. This is because they have to anticipate future economic conditions and adjust policy accordingly, but the effects of their actions may not be seen for some time. Option A is incorrect because monetary policy makers do not need congressional approval to act. Option C is incorrect because the Board of Governors of the Federal Reserve System meets regularly, typically about eight times a year. Option D is incorrect because while it is true that monetary policy primarily affects the general level of prices, it can also influence real variables such as output and employment.

Which of the Following Makes It More Difficult for Monetary