1.Many economists believe that there is a “long and variable time lag” between the time a change in monetary policy is instituted and the time its primary impact on output, employment, and prices is felt. If true, how does this long and variable time lag affect the ability of policy-makers to use monetary policy as a stabilization tool?
2.If the Fed shifts to a more restrictive monetary policy, it will generally sell some of its current holdings of bonds in the open market. How will this action influence each of the following? Briefly explain each of your answers.
a. the reserves available to banks
b. real interest rates
c. household spending on consumer durables
d. the exchange rate value of the dollar
e. net exports
f. the prices of stocks and real assets like apartment or office buildings
g. real GDP
i need short answer, not too long.
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