An important weakness of monetary policy is:
A) the Federal Reserve may run out of reserves.
B) it is slow to work and often disregarded as a result.
C) the Board of Governors depends on Congress for reappointment.
D) making excess reserves available does not insure that businesses and households will borrow.

Question

Quizplus · Accepted Answer

Monetary policy's effectiveness can be limited if banks have excess reserves but businesses and households are unwilling or unable to borrow. This situation can occur during periods of low confidence or economic downturns, rendering monetary policy tools like lowering interest rates less effective in stimulating economic activity.

An Important Weakness of Monetary Policy Is