If the Federal Reserve raises or lowers interest rates too late,it could result in a ________ policy that destabilizes the economy.

Question

Quizplus · Accepted Answer

A procyclical policy is one that exacerbates economic fluctuations by reacting in the same direction as the business cycle. If the Federal Reserve raises or lowers interest rates too late and adopts a procyclical policy, it could lead to further instability and worsen economic conditions. This is why it is important for the Federal Reserve to implement countercyclical policies that work against the business cycle to achieve economic stability. Fiscal and budgetary policy are related to government spending and taxation, and are not directly controlled by the Federal Reserve.

If the Federal Reserve Raises or Lowers Interest Rates Too