If multiplier effects are ____ than policy makers expect or the natural rate of real output is _____ than expected, monetary policy will tend to undershoot its intended effects.
A)Greater; greater.
B)Greater; less
C)Less; greater
D)Less; less

Question

If multiplier effects are ____ than policy makers expect or the natural rate of real output is _____ than expected, monetary policy will tend to undershoot its intended effects.
A)​Greater; greater.
B)​Greater; less
C)​Less; greater
D)​Less; less

Quizplus · Accepted Answer

If the multiplier effects are less than expected or the natural rate of real output is greater than expected, monetary policy will tend to undershoot its intended effects. This is because the lesser multiplier effects imply that the policy action has a smaller impact on the economy, and a greater natural rate of real output implies that the economy is already operating at a higher level, leaving less room for the policy to stimulate growth.

If Multiplier Effects Are ____ Than Policy Makers Expect or the Natural