Monetary policy administered by the Fed is the principal method of softening the effects of the business cycle because _____.

Question

fiscal policy is not effective at easing the fluctuations of the economy

the outside lag for fiscal policy is shorter than the outside lag for monetary policy

monetary policy has the shortest total delay in implementing and achieving a planned outcome

there are more political complications with determining and implementing fiscal policy

Answer 1

The correct answer is:

monetary policy has the shortest total delay in implementing and achieving a planned outcome.

Monetary policy, conducted by the Federal Reserve, generally involves fewer delays in implementation and its effects can be observed more quickly compared to fiscal policy. This makes it a more effective tool for responding to fluctuations in the business cycle.