Economists who work at the Fed recognize that a stimulative monetary policy will not always reduce a high unemployment rate and could even ignite inflation.

Question

Quizplus · Accepted Answer

Stimulative monetary policy, which involves lowering interest rates and increasing the money supply, can indeed reduce unemployment in the short term by encouraging borrowing and spending. However, if the economy is near or at full capacity, such policies can lead to inflation without further reducing unemployment, as demand outpaces supply.

Economists Who Work at the Fed Recognize That a Stimulative