The lags associated with monetary policy make its implementation more difficult during
A) recessions only.
B) contractions only.
C) both expansions and contractions.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

Monetary policy lags affect both expansionary and contractionary policies, making the implementation of monetary policy difficult during both expansions and contractions. The time it takes for changes in interest rates or the money supply to affect the economy can be several months or even a year, which can mean that policymakers are often behind the curve in terms of managing the economy. Additionally, there may be a lag between when policymakers believe the economy needs stimulus or restraint and when they actually take action, further delaying the impact of monetary policy.

The Lags Associated with Monetary Policy Make Its Implementation More