An easy money policy may be less effective than a tight money policy because:
A)the Bank of Canada is always willing to make loans to CPA members that are short of reserves
B)fiscal policy always works at cross purposes with an easy money policy
C)an easy money policy has longer lags associated with its use
D)chartered banks may not be able to find loan customers
E)a tight money policy is always backed up by fiscal policy

Question

Quizplus · Accepted Answer

An easy money policy, which involves lowering interest rates and increasing the money supply, may be less effective if chartered banks struggle to find borrowers for their loans. This situation can occur during economic downturns when businesses and consumers are less inclined to take on new debt, regardless of the lower interest rates.

An Easy Money Policy May Be Less Effective Than a Tight