Answer to Question #224883 in Macroeconomics for Anum naz

Question

2. Discuss the circumstances under which the monetary and fiscal policy multipliers are each,
in turn, equal to zero. Explain in words why this can happen and how likely you think this is.

Answer 1

The policy is most effective when each branch of government concentrates on its strengths. That means the Fed should concentrate on maintaining monetary stability.

Consider the types of statements made by Fed officials regularly while the monetary offset is in effect.