Rising inflation is the pressing concern of the government of Greatland. Suggest a suitable monetary policy that the Central Bank should adopt to lower the rate of inflation
What will be an ideal response?
In order to lower the rate of inflation using monetary policy, the central bank of Greatland needs to raise the rate which banks charge each other for overnight loans, called the federal funds rate. This can be done using four different tools. First, the central bank can reduce the quantity of bank reserves by using open market operations. Second, it can increase the reserve requirement. Third, it can increase the interest rate that it pays on reserves. Fourth, it can increase the discount rate. All of these policies will increase the federal funds rate and have a related effect on the interest rates that households and firms face for borrowing. Consequently, a rise in the federal funds rate reduces the rate of loan growth to households and firms, reducing the rate at which the money supply grows, and reducing the rate of inflation.
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A reduction of the discount rate by the Federal Reserve Banks has the direct effect of
A) making it less costly for commercial banks to borrow from the Fed. B) making it more costly for the Treasury to finance deficits. C) increasing commercial bank reserves. D) increasing the stock of money. E) doing all of the above.
The difference between a firm's revenue and its operating expenses is the firm's operating income
Indicate whether the statement is true or false
If a firm goes bankrupt, the bondholders will get paid back before the stockholders get any money
a. True b. False Indicate whether the statement is true or false
There is great concern over the idea that citizens should have to provide specific identification to be able to vote in elections. A study of the costs and benefits of implementing a voter identification program is an example of
A. positive economics. B. laissez-faire economics. C. normative economics. D. labor economics.