the reduction in supply. However, this may lead to inflation if the increased demand leads to higher prices, which can further erode the purchasing power of consumers.
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Monetary policy: Monetary policy refers to the use of interest rates and other monetary tools by the central bank to influence the economy. In the case of a severe negative supply shock, the central bank may lower interest rates to stimulate borrowing and investment, which can boostdemand and offset the reduction in supply. However, this may lead to inflation if the increased demand leads to higher prices, which can further erode thepurchasing power of consumers.
Explain this graphically please.
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- “Monetary policy is the macroeconomic policy laid down by the central bank of an economy.”In terms of the above statement, explain how monetary policy can be used to combat inflationPlease label your answers to the following questions clearly. (a) Define what is meant by the term monetary policy. (b) Outline what actions the central bank should take in the money market in response to the emergence of significant inflation, and briefly explain what consequences this would have for that market. (c) Briefly describe two ways in which the changes outlined in your answer to Part (b) would be transmitted to the wider economy.The monetary policy rate is the rate at which the Central Bank of Ghana lends to commercial banks. The results from table 4.4.1 shows that the monetary rate in Ghana declined from 2019 to 2021, before rising in 2022. The decline in the monetary rate from 2019 to 2021 can be attributed to an expansionary monetary policy, which was implemented to boost the economy of Ghana by reducing unemployment. The rise in the monetary rate in 2022 is a sign of a contractionary monetary policy, which is intended to reduce money supply and increase the cost of borrowing. This can help control inflation but may also lead to lower economic growth due to reduced aggregate demand (consumption). Consumption which is a component of GDP, the decrease in Aggregate demand will lead to decrease GDP and economic growth at large. Digitalization has become the norm in all parts of life, including finance. Mobile money has acquired substantial acceptance in Ghana as a simple mechanism for fund transfers, payments,…
- The monetary policy has two basic goals: to promote “maximum” sustainable output and employment and to promote “stable” prices (Federal Reserve Bank of San Franciso). Making these two goals possible is based off of more than just monetary. Technology is now included because technology can replace employment. If people decide to save, it can affect both employment and the goods that can be reduced. There are many other things that can affect the maximizing of sustainable output. The cause-effect chain through is that policy can have an effect on banks and money supply. The monetary policy also has an effect the way consumers spending and the interest rates that are given by banks. It can also affect the way people invest. The major strengths of monetary policy is that it stable prices. When inflation rises faster than expected, the Fed may sell government bonds to take money out of circulation or raise short-term interest rates (Federal Reserve Bank of San…During an economic downturn, a nation's central bank decides to implement quantitative easing by purchasing large amounts of government securities to increase the money supply and encourage lending and investment. This policy action is intended to: A) Tighten the money supply B) Increase interest rates C) Stimulate economic growth D) Reduce public spendingThe following is TRUE about monetary policy EXCEPT, A) It uses interest rate and money supply as monetary tools. B) It manages the creation and flow of money and credit in the economy. C) It relates to revenue and expenditure by government budget. D) It aims to control the money supply and regulate the monetary sector.
- Monetary policy For the first time since 2006, the Federal Reserve voted to raise interest rates by a one-quarter percentage point in December 2015. Prior to this increase, interest rates had remained between the 0.00% - 0.25% range, an area called “the zero lower bound.” The Federal Reserve had driven interest rates down that low as a means of helping the economy get back on its feet after the Financial Crisis. The reasoning was that consumers and businesses needed access to loans so that production could turn around. (Consumers take out loans to buy high price items like cars and homes. Businesses use loans as a means of expanding their business. In both instance, more goods will be produced.) The increase in 2015 moved rates to the 0.25% - 0.50% range. As of October 2018, interest rates have moved to 1.00% - 1.25% range. For this discussion board, I want you to do some research into the “Financial Crisis.” Why did it occur? Can you characterize the behavior of the…Suppose that you are employed as an advisor to the central bank. Select the proper policy recommendation or economic prediction for each of the following scenarios. Which policy is appropriate when a rising aggregate price level is a concern but GDP is growing at an acceptable rate? contractionary or restrictive monetary policy (tight money policy) It is unclear which type of monetary policy is appropriate. expansionary monetary policy (easy money policy) Which policy is appropriate when a rising aggregate price level is a concern and GDP is not growing at an acceptable rate? It is unclear which type of monetary policy is appropriate. contractionary or restrictive monetary policy (tight money policy) expansionary monetary policy (easy money policy) Contractionary or restrictive monetary policy (tight money policy) will cause interest rates to increase sometimes and decrease sometimes. decrease. increase.Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that the minimum wage increases to $15 in the United States, which affects the entire labor market and increases the cost of production. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose the Federal Reserve wants to keep prices in the economy as low as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point "3."
- Hello, I need help with a macroeconomics question. Thank you in advance! The answers are based on a short exerpt from the Federal Reserves press release from Feb 1, 2023 (attatchde below). 7. What do you expect to happen to the money supply? 8. What do you expect to happen to the inflation rate? 9. How would you expect all these decisions to affect employment in the economy? 10. How do the effects you found on 8 and 9 align with what the Fed was hoping to attain?The statements regarding savings and loans (S&Ls) are all true EXCEPT S&Ls are not covered by federal deposit insurance. S&Ls are deposit-taking financial institutions. During the 1970s, inflation made savers less willing to deposit their money in S&Ls. Because of the troubles that S&Ls experienced in the 1970s, Congress loosened regulations on S&Ls. During the real estate boom in the 1970s and 1980s, S&Ls took on more risky loans.Consider the same economy as in the previous question with the supply of money fixed at $2000. Now suppose there is a shift in the money demand equation such that households in aggregate desire to hold an additional $150 in cash balances for any given level of interest rates. (a) Calculate the effect this has on the equilibrium interest rate (to two decimal places). (b) What would the central bank have to do to offset this effect?
