Monetary policy can affect real variables in the short run if monetary policy:
A)is fully explained to households.
B)is random.
C)is predictable.
D)all of the above.

Question

Quizplus · Accepted Answer

Monetary policy can affect real variables in the short run if it is random because unpredictable changes in monetary policy can lead to adjustments in consumption, investment, and other components of aggregate demand before prices fully adjust. Predictable policy actions are often anticipated by the market, reducing their immediate real effects.

Monetary Policy Can Affect Real Variables in the Short Run