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One of the limitations of both monetary and fiscal policy is that the tools they have to work with cannot go below zero. Interest rates,
One of the limitations of both monetary and fiscal policy is that the tools they have to work with cannot go below zero. Interest rates, taxes, and government spending cannot be reduced below zero (or at least not for long). Is this more of a problem for monetary policy, or for fiscal policy? Why? a. It's more of a problem for monetary policy, because the interest rate sometimes falls below zero on its own and then the Fed has to do contractionary policy to get it back up. b. It's more of a problem for fiscal policy, because it forces the government to take on debt to pay for government spending. c. It's more of a problem for fiscal policy, because it prevents really deep tax cuts. d. It's more of a problem for monetary policy, because interest rates are usually in the low single digits anyway, so they can't go much lower
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