ECON 2 Lecture 9: Ch16 The Monetary System

An expansionary monetary policy may be less effective than a restrictive monetary policy because:

 

a. the Federal Reserve Banks are always willing to make loans to commercial banks that are short of reserves.

b. fiscal policy always works at cross purposes with an expansionary monetary policy.

c. changes in exchange rates complicate an expansionary monetary policy more than they do a restrictive monetary policy.

d. commercial banks may not be able to find loan customers.

 

What are the goals of an economic system? What is the criterion to measure the effectiveness of a system? What are the monetary goals? What are the fiscal goals? How do governments influence monetary and fiscal goals?