Question

The metaphor most commonly invoked to capture the idea that an expansionary monetary policy might not work due to borrowers not wanting to borrow or lenders not wanting to lend is:

Multiple Choice
a. pushing on a string.
b. pouring through a sieve.
c. hovering over a slope.
d. pulling on a rope.

Answer 1

The metaphor for expansionary monetary policy being ineffective because of a lack of willingness to lend or borrow is a. 'pushing on a string'.

Step-by-step explanation:

The metaphor most commonly invoked to describe the situation where expansionary monetary policy might not be effective due to borrowers not wanting to borrow or lenders not wanting to lend is pushing on a string. This concept illustrates the difficulty central banks face in stimulating economic activity when banks hold excess reserves and do not issue loans, and when businesses and consumers are hesitant to take on new debt. Although expansionary monetary policies are generally impactful, they may be limited during deep recessions, as evidenced by Japan's economy in the late 1990s and early 2000s.