why do changes in monetray policy have different effects over different time horizons?
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This question asked by Olusegun S.
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Monetary policy, like fiscal policy, has short-term and long-term impacts. The immediate impact of changes in monetary policy are felt in short-term interest rates. This affects the mortgage originations and refis. Longer term, monetary easing or tightening can spur or retard economic activity by altering the attractiveness of stocks, bonds, real estate and other investments. In addition, if monetary policy is succesful it creates additional stability in the economy by reducing the amplification of the business cycle.
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