How to control monetary policy, Macroeconomics

Assignment Help:

Q. How to control Monetary policy?

Remember that the money supply is equal to the money multiplier times the monetary base. We will presume that money multiplier is constant and because the monetary base is completely under the control of the central bank, central bank will control the money supply. 

Monetary policy = change in money supply 

Central bank actually has other monetary policy instrument apart from being able to conclude the money supply. The most significant one is the target interest rate for the overnight market. We won't consider the possibility of changing the target interest rate. Though we know that there is a negative relationship between target rate and money supply. Hence if you want to investigate the effect of an increase in target interest rate, you may just as well investigate a decrease in the money supply.


Related Discussions:- How to control monetary policy

What causes a supply curve to shift, What causes a supply curve to shift? ...

What causes a supply curve to shift? a. Changes into Input Prices An input is a good which is used to generate another good. b. Changes into Technology c. Chang

Determine the categories of finished goods, Determine the categories of fin...

Determine the categories of finished goods Finished goods in the goods market are divided into 4 categories: private consumption going to private sector, public consumption for

Account that earns, Suppose you have decided to do some savings. You will d...

Suppose you have decided to do some savings. You will deposit $200 this year into an account that earns 2% per year and increase the amount deposited each year by 20% in every year

Lower price in restaurant, A restaurant/bar is analyzing its pricing of bee...

A restaurant/bar is analyzing its pricing of beer. It has determined that the price elasticity of demand for beer is 0.8, the cross-price elasticity for wine with respect to the pr

Why are the imports subtracted - nominal gdp, Why are the imports subtracte...

Why are the imports subtracted when GDP is measured in expenditure approach? If you woke up in the working & found that nominal GDP has doubled overnight. what statistic wou

Monetrary policy, draw a diagram that explains how interest rate sare deter...

draw a diagram that explains how interest rate sare determined in the keynesian macroeconomic model

Inflation, What are the effects of neutral inflation

What are the effects of neutral inflation

Perfect competion, discuss the contention that the existance of a labour ma...

discuss the contention that the existance of a labour market in a perfect competion is a fallacy

Economic assesment, can you tell me how this works, i am struggling to writ...

can you tell me how this works, i am struggling to write my report in economics and i would like to know how much does it cost some help

Neo-classical theory of trade, explain the neo-classical theory of trade an...

explain the neo-classical theory of trade and show the difference between this and the classical approach, as wellas the similarities

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