Which option best describes the Federal Reserve timeframe for monetary policy implementation and observable policy effect?
A. Short implementation time with a long lag before observation of effectiveness.
B. Long implementation time with a short lag before observation of effectiveness.
C. Short implementation time with a no lag before observation of effectiveness.
D.Long implementation time with a no lag before observation of effectiveness.
✅ Answers
Answerer 1
The answer is A. The fed can act without the approval of congress which means implementation time is short. However it takes a while to observe the effects of monetary policy. The fed has to be careful when it implements monetary expansion otherwise we could end up with hyperinflation.