question archive Which of the following could limit the ability of a central bank to conduct expansionary monetary policy? A
Which of the following could limit the ability of a central bank to conduct expansionary monetary policy? A
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Which of the following could limit the ability of a central bank to conduct expansionary monetary policy?
A. Investment demand is nearly perfectly elastic.
B. Money demand is nearly perfectly elastic.
C. Banks make loans with all excess reserves.
D. Households carry very little cash, holding their money in checking and saving deposits.
E. Money supply is nearly perfectly inelastic.
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Option d is correct, because if the money supply is perfectly inelastic which means that money supply will not change whatever may be the interest rate, so in other words even if central bank reduces the interest rates in expansionary policy, then money won't change much.
