Question

Why will it difficult for the fed to use monetary policy to direct the economy back to full employment and price stability from the recession of 2008-2009?
a. the fed does not have the tools needed to alter the supply of money.

b. the time lags between changes in monetary policy and when the changes exert an impact on output and prices are long and variable.

c. monetary policy is unable to alter short-term interest rates.

d. it takes the fed a long time to change the direction of monetary policy?

Answer 1

the time lags between changes in monetary policy and when the changes exert an impact on output and prices are long and variable.