Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. These lessons include the following.
A)Rising interest rates indicate a tightening of monetary policy,whereas falling interest rates indicate an easing of monetary policy.
B)Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero.
C)Avoiding fluctuations in the level of unemployment is an important objective of monetary policy,thus providing a rationale for interest-rate stability as the primary long-run goal for monetary policy.
D)Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are not important elements in various monetary policy transmission mechanisms.

Question

Quizplus · Accepted Answer

Monetary policy can still be effective at the zero lower bound through mechanisms like quantitative easing and forward guidance, which influence expectations and other asset prices.

Analysis of the Transmission Mechanisms of Monetary Policy Provides Four