Can the central bank change the interest rate in the economy

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1. Can the central bank change the interest rate in the economy through changes in its discount/bank rate? Present the analysis and theory relevant to your answer for the economy you live in.

2. Monetary theory implicitly assumes that the interest rates and the money stock are uniquely linked so that changes in one have a corresponding counterpart in the other, so that it does not matter which one the central bank chooses to change. What assumptions are needed for this assertion? Are they realistic enough for policy purposes?

Reference no: EM13897791

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