Monetary policy affects interest rates but has little effect on inflation or business cycles.

Question

Quizplus · Accepted Answer

This statement is false. Monetary policy can have a significant impact on both inflation and business cycles, as central banks adjust interest rates and the money supply in response to changes in economic conditions. For example, if the economy is experiencing high inflation, a central bank may raise interest rates to cool down demand and reduce price pressures. On the other hand, if the economy is in a recession, a central bank may cut interest rates to stimulate borrowing and investment, which can help to spur economic growth.

Monetary Policy Affects Interest Rates but Has Little Effect on Inflation