If consumers and businesses are especially pessimistic, as in the Great Recession of 2007-2009, and do not want to borrow money from banks, then the use of an expansionary money policy is likened to:
A) Completing the circle
B) Pushing on a string
C) Filling in the blanks
D) Checking the list

Question

Quizplus · Accepted Answer

The use of an expansionary monetary policy in a situation where consumers and businesses do not want to borrow money is likened to pushing on a string - it will have minimal or no effect on increasing borrowing and spending. This is because the demand for loans is low due to pessimism and uncertainty, and so lowering interest rates or increasing the money supply may not entice them to borrow more.

If Consumers and Businesses Are Especially Pessimistic, as in the Great