Question: In explaining why monetary policy did not pull Japan out of a recession in the early 2000s, an official at the Bank of Japan was
In explaining why monetary policy did not pull Japan out of a recession in the early 2000s, an official at the Bank of Japan was quoted as saying that despite "major increases in the money supply" the money "stayed in banks".
a) Explain what the official meant by saying that the money stayed in banks.
b) Why would that be a problem?
c) Where does the money go if an expansionary monetary policy is successful?
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