The Federal Reserve can use monetary policy to
A) change output in the long run, but not the short run.
B) change output in the short run, but not the long run.
C) change output in both the short run and the long run.
D) Monetary policy has no effect on output.

Question

Quizplus · Accepted Answer

The Federal Reserve uses monetary policy primarily to influence the economy in the short run by adjusting interest rates and influencing money supply. In the long run, the economy's output is determined by factors such as technology, resources, and labor, which are not directly affected by monetary policy.

The Federal Reserve Can Use Monetary Policy to