During banking crises monetary policy is very effective, but fiscal policy is ineffective.

Question

Quizplus · Accepted Answer

During banking crises, the effectiveness of monetary and fiscal policies may depend on the specific circumstances of the crisis. Both policies can potentially be effective in addressing different aspects of the crisis. Monetary policy can help restore liquidity to the banking system by providing emergency funding and injecting new money into the economy. Fiscal policy, on the other hand, can help stimulate aggregate demand through government spending and tax policies. Therefore, it may not be accurate to say that fiscal policy is always ineffective during banking crises.

During Banking Crises Monetary Policy Is Very Effective, but Fiscal