Ask Question
2 November, 08:52

Which of the following is an example of countercyclical monetary policy posing a danger of overreaction? Select all that apply: Loose monetary policy seeking to end a recession goes too far and triggers inflation. Tight monetary policy seeking to reduce inflation goes too far and begins a recession. Tight fiscal policy seeking to reduce inflation goes too far and begins a recession. Loose fiscal policy seeking to end a recession goes too far and triggers inflation.

+1
Answers (1)
  1. 2 November, 10:18
    0
    Question:

    Which of the following is an example of countercyclical monetary policy posing a danger of overreaction?

    Select all that apply:

    A) Loose monetary policy seeking to end a recession goes too far and triggers inflation.

    B) Tight monetary policy seeking to reduce inflation goes too far and begins a recession.

    C) Tight fiscal policy seeking to reduce inflation goes too far and begins a recession.

    D) Loose fiscal policy seeking to end a recession goes too far and triggers inflation.

    Answer:

    The correct choices are: A) and B)

    Explanation:

    When the Federal Reserve System wants to curtail a possible recession it tweakes the system to allow more inflow of money into the economy. When money circulation is about to go out of hand, it mops up excess money in the economy by tweaking interest rates among other monetar policy tools.

    This cycle may go out of hand if the the Fed miscalculate their actions by either allowing too much money in circulation for a long time or if they mop up too much money at a given period.

    Cheers!
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Which of the following is an example of countercyclical monetary policy posing a danger of overreaction? Select all that apply: Loose ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers