Question

Explain the 4 Tools of Monetary Policy and how the Central Bank impacts the overall economy....

Explain the 4 Tools of Monetary Policy and how the Central Bank impacts the overall economy. Make sure to include a graph of how changes in the money supply impact interest rates.

Homework Answers

Answer #1

The four major tools of monetary policy are :

1) Open-Market Operations,

2) Changing The Reserve Ratio,

3) Changing The Discount Rate, And

4) The Use Of Term Auction Facility. Monetary Policy

A key role of central banks is to conduct monetary policy to achieve price stability (low and stable inflation) and to help manage economic fluctuations. The policy frameworks within which central banks operate have been subject to major changes over recent decades.

Expansionary Monetary Policy: Increasing the MS to decrease UE:

Contractionary Monetary Policy: Decreasing the MS to decrease IN:

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to change...
Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to change the money supply and interest rates in the economy and Which tool is the most important? Explain why.
PROBLEM 5:   MONETARY POLICY If the central bank of Canada institutes a contractionary monetary policy, describe...
PROBLEM 5:   MONETARY POLICY If the central bank of Canada institutes a contractionary monetary policy, describe what will happen to the following variables relative to what would happen without the policy: The money supply Interest rates Investment Consumption Net Exports The aggregate demand curve Real GDP The price level The value of the Canadian dollar The long run aggregate supply curve PROBLEM 5:   MONETARY POLICY If the central bank of Canada institutes a contractionary monetary policy, describe what will happen...
Describe the monetary policy tools used by the Federal Reserve. Explain how the central banks around...
Describe the monetary policy tools used by the Federal Reserve. Explain how the central banks around the world adjusted their monetary policy during the recent financial crisis (2007-2008).
Suppose that in a closed economy the fiscal policy is contractionary and monetary policy is expansionary,...
Suppose that in a closed economy the fiscal policy is contractionary and monetary policy is expansionary, and the central bank is setting the interest rates (LM is horizontal). Graphically analyze this policy mix by using IS-LM diagram. What will be the impact on real income and on interest rate in the short run? What will be the impact of this policy mix on the economy in the medium run? Show by using an AD-AS-LRAS diagram.
Interest rates fall when the central bank conducts contractionary monetary policy an increase in savings increases...
Interest rates fall when the central bank conducts contractionary monetary policy an increase in savings increases the supply of loanable funds in the economy a new technology leads people to borrow more in order to invest in the new technology the central bank sells Treasury bills
Explain in detail the process of Monetary Policy transmission of an increase in the cash interest...
Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should be used: (1) money supply and demand (2) investment demand schedule (3) AS/AD diagram. Interest rates is the variable that connects the first and second diagram). Question
a. Suppose the economy is in an inflationary gap. If the correct monetary policy is used...
a. Suppose the economy is in an inflationary gap. If the correct monetary policy is used how will the Federal Reserve wish to change its interest rate target? b. Explain how the Fed, using open market operations, would do that. c. Then show, using the liquidity preference model(chapter 15), show how equilibrium interest rates and the money supply change(draw a graph).
Suppose the central bank engages in contractionary monetary policy that results in lower money growth This...
Suppose the central bank engages in contractionary monetary policy that results in lower money growth This lower money growth will cause which of the following in the short run? 1 Lower real interest rates and lower nominal interest rates 2 Lower real interest rates and higher nominal interest rates 3 Higher real interest rates and higher nominal interest rates 4 Higher real interest rates and lower nominal interest rates
What are some of the monetary policy tools used by Central Bank and which are more...
What are some of the monetary policy tools used by Central Bank and which are more likely to have the desired out come in the English-speaking Caribbean territories based on empirical evidence? What does it therefore suggest about the "One policy fit all" approach especially the region will converge into a single Caribbean Union "CSME"
What are the tools of monetary policy and how do they affect the money supply?
What are the tools of monetary policy and how do they affect the money supply?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT