Give a brief description of the transmission mechanism, Macroeconomics

Assignment Help:

Give a brief description of the transmission mechanism

1. When the central bank target rate increases, other interest rates in the economy will increase (and the money supply will decrease, but that is not important here).

2. With higher interest rates, it is more expensive to borrow and more advantageous to save. Therefore, consumption and investment will decrease (we say that the central bank "cools off" the economy).

3. As consumption and investment fall, GDP is reduced and unemployment will rise. This will cause inflation and the growth rate in wages to fall.

 


Related Discussions:- Give a brief description of the transmission mechanism

frame work, Hello sir, madam... I am hassan PHD student. I''m lost to get...

Hello sir, madam... I am hassan PHD student. I''m lost to get a good frame work of my thesis about e government and economic growth. and I need to know how to measure the variable

Describe supply and demand in macroeconomics, Q. Describe Supply and demand...

Q. Describe Supply and demand in macroeconomics? In microeconomics, we are careful to distinguish between demand, supply and observed quantity. The first two are hypothetical c

Says law , is there a graph for says law?

is there a graph for says law?

Relate overnight interest rates with interest rates, Relate overnight inte...

Relate overnight interest rates with interest rates By controlling overnight interest rates, the central bank will affect the interest rates with longer maturity. The reason f

Accounting system-example ii, ACCOUNTING SYSTEM-EXAMPLE Let us now intr...

ACCOUNTING SYSTEM-EXAMPLE Let us now introduce a complication. There are three firms in the production sector. The Fruit Extracts Company manufactures from raw fruit, fruit ext

Supply and Demand, During the 1990s, technological advance reduced the cost...

During the 1990s, technological advance reduced the cost of computer chips. Explain, with the use supply and demand diagrams, how the following markets are affected in terms of pr

Component of balance payments, Component of balance payment: BOP is a ...

Component of balance payment: BOP is a statement  that summarises all the economic transactions between residents (individuals, companies and other organisations) of the home

Macro, Difference between mec and mei.

Difference between mec and mei.

Ppcs, how to get full marks in a drawing of ppc diagrams

how to get full marks in a drawing of ppc diagrams

Law of diminishing returns, Explain the law of diminishing marginal returns...

Explain the law of diminishing marginal returns using the example of a factory which is currently running at half capacity and employs more staff

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd