Response of firms to a stimulative monetary policy

Reference no: EM131226093

Response of Firms to a Stimulative Monetary Policy:

In a weak economy, the Fed commonly implements a stimulative monetary policy to lower interest rates, and presumes that firms will be more willing to borrow.

Even if banks are willing to lend, why might such a presumption about the willingness of firms to borrow be wrong? What are the consequences if the presumption is wrong?

Reference no: EM131226093

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