One reason the Fed has difficulty adjusting to a decrease in aggregate demand is that it must spend time persuading politicians to agree to its actions.

Question

Quizplus · Accepted Answer

The Fed has the autonomy to adjust monetary policy independently without needing to persuade politicians to agree to its actions. However, the effectiveness of monetary policy can be limited by other factors such as the zero lower bound on interest rates and the transmission mechanisms through which policy affects the economy.

One Reason the Fed Has Difficulty Adjusting to a Decrease