When the economy is far below the natural rate of real output, efforts to change inflation with monetary policy will be ____ successful and efforts to stimulate the economy will be ____ successful.
A)More; less
B)More; more
C)Less; less
D)Less; more

Question

When the economy is far below the natural rate of real output, efforts to change inflation with monetary policy will be ____ successful and efforts to stimulate the economy will be ____ successful.
A)​More; less
B)​More; more
C)​Less; less
D)​Less; more

Quizplus · Accepted Answer

When the economy is significantly below its natural rate of real output, monetary policy aimed at changing inflation will be less successful due to factors like liquidity traps. However, efforts to stimulate the economy, such as lowering interest rates or increasing money supply, tend to be more successful as they encourage spending and investment.

When the Economy Is Far Below the Natural Rate of Real