Monetary policy differs from fiscal policy in that
a. it has to be exercised by the legislature.
b. the policy goals are very different.
c. it is a slower process than fiscal policy.
d. it is a faster process than fiscal policy.
e. none of these answers are correct.
http://www.frbsf.org/education/activities/drecon/2002/0203.html
The correct answer is d. it is a faster process than fiscal policy.
To arrive at this answer, let's break down the options:
a. Monetary policy does not have to be exercised by the legislature. In most countries, monetary policy is conducted by an independent central bank.
b. While the policy goals of monetary and fiscal policy can be complementary, they are not inherently different. Both policies aim to manage and stabilize the economy, but through different means.
c. Fiscal policy and monetary policy differ in terms of the speed of their implementation. Fiscal policy, which involves changes in government spending and taxation, typically requires the approval and implementation of legislative processes, which can be a slower process. On the other hand, monetary policy, which involves the control of interest rates and money supply, can be implemented relatively quickly by central banks.
d. This is the correct answer. Monetary policy is generally faster than fiscal policy. Central banks can use tools like adjusting interest rates or injecting liquidity into the banking system to influence the economy quickly, often within weeks or even days.
e. This answer is incorrect since the correct answer is d.