Module 4.6

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12th grade

macroeconomics

monetary policy

6 fois fait

Créé par

Zachary Foust

United States

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Compléter Module 4.6Version en ligne Monetary Policy - Fill-in-the-Blank par Zachary Foust 1 target price stabilize availability Monetary policy can be used to the economy . Central banks change the of money and credit in order to increase or decrease interest rates . A primary goal of monetary policy is to promote stability - to prevent deflation or high rates of inflation . Many central banks conduct monetary policy in an attempt to hit their rate of inflation . 2 demand inflation expand investment left right below investment Through its effect on the interest rate , monetary policy works by shifting the aggregate curve . If the central bank want to the economy , it will decrease the nominal interest rate . A lower interest rate will lead to more spending , an increase in interest rate - sensitive consumption , an increase in aggregate demand , and higher real GDP . Monetary policy that shifts the AD curve to the is known as expansionary monetary policy . A higher interest rate leads to lower spending , lower interest rate - sensitive consumption , a decrease in aggregate demand , and lower real GDP . Monetary policy that shifts the AD curve to the is called contractionary monetary policy . When the economy is operating full employment or experiencing a recession , the central bank can use expansionary monetary policy to close the negative output gap . When the economy is experiencing , the central bank can use contractionary monetary policy to close the positive output gap and restore price stability . 3 funds central banks policy federal The overnight interbank lending rate is the interest rate at which funds are borrowed and lent among . The overnight interbank lending rate is also referred to as the central bank's rate . The overnight interbank lending rate in the United States is called the rate . The bank sets a target policy rate , a desired level for the overnight interbank lending rate . 4 reserves ample The way in which a central bank implements monetary policy to achieve its target interest rate depends on whether the economy is operating in an economy with limited or reserves . 5 falls rises three bonds lending borrow deposits investment cental sale purchase The central bank has policy tools it can use in economies with limited reserves : reserve requirements , the discount rate , and open market operations . When central banks decrease the reserve requirement , banks are allowed to lend a larger percentage of their , leading them to increase the money supply . The increase in the money supply leads to lower interest rates , more and interest rate - sensitive consumption , and higher GDP . If the central bank increases the reserve requirement , banks are forced to reduce their , leading to a fall in the money supply , higher interest rates , and lower GDP . Banks in need of reserves can also from the central bank . The interest rate charged by banks is called the discount rate . If the central bank reduces the discount rate , the cost to banks of borrowing from the central bank , and banks respond by increasing their own lending . If the discount rate , banks borrow less from the central bank and the supply of bank loans decreases , which decreases the money supply and increases the interest rate . In an open market operation , the central bank buys or sells government . An open - market of government bonds leads to an increase in the money supply , driving down the equilibrium interest rate to the target level . An open - market of government bonds leads to a fall in the money supply , driving up the equilibrium interest rate to the target level . 6 below Lowering IORB reserve vertical horizontal raises three ample discount intersect Some central banks implement monetary policy in an economy with reserves using tools adapted or created following the 2008 financial crisis . The interest on reserve balances ( IORB ) is the rate the central bank pays in interest to banks for their balances . The interest paid on reserve balances reduces the incentive for banks to lend at rates IORB because banks would earn less from loaning their cash than they would by simply holding it as reserves . When the central bank the IORB , banks respond by holding more excess reserves . the IORB prompts banks to make more loans because they earn less by keeping cash in reserves . The reserves demand curve has sections . The reserves demand curve is horizontally sloped at the rate . The reserves demand curve is again at the policy rate . The level of reserves maintained by the central bank does not depend on the policy rate , therefore the supply curve for reserves is . Changes in the lead to changes in the policy rate . So long as the supply and demand for reserves in the horizontal range of the demand curve for reserves , the policy rate will be determined by the rates administed by the central bank . 7 quickly time Monetary policy is subject to lags : It takes for a central bank to recognize ecnomic problems and time for monetary policy to affect the economy . However , since a central bank can move much more than the government , monetary policy lags are shorter than fiscal policy lags , which makes monetary policy the preferred tool .

Compléter

Monetary policy can be used to the economy .

Central banks change the of money and credit in order to increase or decrease interest rates .

A primary goal of monetary policy is to promote stability - to prevent deflation or high rates of inflation .

Many central banks conduct monetary policy in an attempt to hit their rate of inflation .

demand inflation expand investment left right below investment

Through its effect on the interest rate , monetary policy works by shifting the aggregate curve .

If the central bank want to the economy , it will decrease the nominal interest rate .

A lower interest rate will lead to more spending , an increase in interest rate - sensitive consumption , an increase in aggregate demand , and higher real GDP .

Monetary policy that shifts the AD curve to the is known as expansionary monetary policy .

A higher interest rate leads to lower spending , lower interest rate - sensitive consumption , a decrease in aggregate demand , and lower real GDP .

Monetary policy that shifts the AD curve to the is called contractionary monetary policy .

When the economy is operating full employment or experiencing a recession , the central bank can use expansionary monetary policy to close the negative output gap .

When the economy is experiencing , the central bank can use contractionary monetary policy to close the positive output gap and restore price stability .

funds central banks policy federal

The overnight interbank lending rate is the interest rate at which funds are borrowed and lent among .

The overnight interbank lending rate is also referred to as the central bank's rate .

The overnight interbank lending rate in the United States is called the rate .

The bank sets a target policy rate , a desired level for the overnight interbank lending rate .

reserves ample

The way in which a central bank implements monetary policy to achieve its target interest rate depends on whether the economy is operating in an economy with limited or reserves .

falls rises three bonds lending borrow deposits investment cental sale purchase

The central bank has policy tools it can use in economies with limited reserves : reserve requirements , the discount rate , and open market operations .

When central banks decrease the reserve requirement , banks are allowed to lend a larger percentage of their , leading them to increase the money supply .

The increase in the money supply leads to lower interest rates , more and interest rate - sensitive consumption , and higher GDP .

If the central bank increases the reserve requirement , banks are forced to reduce their , leading to a fall in the money supply , higher interest rates , and lower GDP .

Banks in need of reserves can also from the central bank .

The interest rate charged by banks is called the discount rate .

If the central bank reduces the discount rate , the cost to banks of borrowing from the central bank , and banks respond by increasing their own lending .

If the discount rate , banks borrow less from the central bank and the supply of bank loans decreases , which decreases the money supply and increases the interest rate .

In an open market operation , the central bank buys or sells government .

An open - market of government bonds leads to an increase in the money supply , driving down the equilibrium interest rate to the target level .

An open - market of government bonds leads to a fall in the money supply , driving up the equilibrium interest rate to the target level .

below Lowering IORB reserve vertical horizontal raises three ample discount intersect

Some central banks implement monetary policy in an economy with reserves using tools adapted or created following the 2008 financial crisis .

The interest on reserve balances ( IORB ) is the rate the central bank pays in interest to banks for their balances .

The interest paid on reserve balances reduces the incentive for banks to lend at rates IORB because banks would earn less from loaning their cash than they would by simply holding it as reserves .

When the central bank the IORB , banks respond by holding more excess reserves .

the IORB prompts banks to make more loans because they earn less by keeping cash in reserves .

The reserves demand curve has sections .

The reserves demand curve is horizontally sloped at the rate .

The reserves demand curve is again at the policy rate .

The level of reserves maintained by the central bank does not depend on the policy rate , therefore the supply curve for reserves is .

Changes in the lead to changes in the policy rate .

So long as the supply and demand for reserves in the horizontal range of the demand curve for reserves , the policy rate will be determined by the rates administed by the central bank .

quickly time

Monetary policy is subject to lags : It takes for a central bank to recognize ecnomic problems and time for monetary policy to affect the economy .

However , since a central bank can move much more than the government , monetary policy lags are shorter than fiscal policy lags , which makes monetary policy the preferred tool .

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Module 4.6Version en ligne

par Zachary Foust

target price stabilize availability

demand inflation expand investment left right below investment

funds central banks policy federal

reserves ample

falls rises three bonds lending borrow deposits investment cental sale purchase

below Lowering IORB reserve vertical horizontal raises three ample discount intersect

quickly time