Monetary policy is having little impact on the economy

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Monetary policy is having little impact on the economy today because: (a) the Fed began to lower interest rates more than three and a half years ago, so the impact has worn off. (b) low interest rates have caused an “asset price bubble” in stocks, so money is flowing into the stock market and not on spending on goods and services. (c) there is a “liquidity trap” where banks are not lending despite a big increase in the supply of money. (d) the multiplier effect of monetary policy is small.

Reference no: EM131112283

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