Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Question
Chapter 14, Problem 10CQ
To determine
Explain the long and variable time lag that affects the ability of policy makers to make decisions if the statement is true.
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Many economists believe that there is a long and variable time lag between the time a change in monetary policy is instituted and the time its primary impact on output, employment, and prices is felt. If true, how does this long and variable time lag affect the ability of policy-makers to use monetary policy as a stabilization tool?
Show graphically that the less responsive is investment to interest rates, the less effective is monetary policy as a stabilization tool.
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Macroeconomics: Private and Public Choice
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