Which of the following is considered a limitation of monetary policy?
A) the cause-effect chain
B) its cyclical asymmetry
C) its isolation from political pressure
D) the speed with which it can be implemented

Question

Quizplus · Accepted Answer

The cyclical asymmetry is a limitation of monetary policy because it is easier and quicker to have an expansionary monetary policy than a contractionary one. This means that during a downturn, monetary policy may not be able to stimulate the economy as effectively as during an upturn. The cause-effect chain refers to the ability of monetary policy to influence the economy through interest rates, so it is not a limitation. Isolation from political pressure is actually an advantage of monetary policy, and the speed with which it can be implemented is also generally seen as a positive aspect of this policy tool.

Which of the Following Is Considered a Limitation of Monetary