Which of the following is NOT a reason why,in practice,monetary policy-making is much more complex than the theory would suggest?
A) The central bank's knowledge of how the real world works is imperfect.
B) The central bank's knowledge of the output gap is imprecise.
C) The central bank's knowledge of the timing of a monetary policy action on the economy is imperfect.
D) The central bank's knowledge of the magnitude of the effect of a given interest rate change on planned aggregate expenditure is imprecise.
E) The central bank's ability to change the overnight rate is limited.

Question

Quizplus · Accepted Answer

While all of the given options may contribute to the complexity of monetary policy-making, the ability of the central bank to change the overnight rate is not a reason why it is more complex than theory suggests. In fact, the ability to change interest rates is one of the main tools of monetary policy-making.

Which of the Following Is NOT a Reason Why,in Practice,monetary