Monetary policy could be procyclical if the Federal Reserve
A)is late recognizing that a recession has begun and conducts expansionary monetary policy.
B)is quick to recognize that a recession has begun and conducts expansionary monetary policy.
C)is late recognizing that a recession has begun and does not conduct expansionary monetary policy.
D)is quick to recognize that a recession has begun and does not conduct expansionary monetary policy.

Question

Quizplus · Accepted Answer

If the Federal Reserve is late recognizing that a recession has begun and conducts expansionary monetary policy, it could exacerbate the economic cycle by adding fuel to the already overheated economy. This would result in procyclical monetary policy, which is not desirable.

Monetary Policy Could Be Procyclical If the Federal Reserve